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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004



Commission file number: 000-32665



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Oglebay Norton Company

(Exact name of Registrant as specified in its charter)



|                                                                  |  |                                  
|----------------------------------------------------------------- |  | ---------------------------------
|Ohio                                                              |  | 34-1888342                       
|(State or other jurisdiction of incorporation or organization)    |  | (IRS Employer Identification No.)
|                                                                  | 
|North Point Tower 1001 Lakeside Avenue, 15thFloor Cleveland, Ohio |  | 44114-1151                       
|(Address of principal executive offices)                          |  | (Zip Code)                       



Registrants
telephone number, including area code: (216) 861-3300

Securities registered pursuant to Section 12(g) of the Act:



|                |  |                                
|--------------- |  | -------------------------------
|Common Stock    |  | Series A Convertible           
|$0.01 Par Value |  | Preferred Stock $0.01 Par Value



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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrants knowledge, in any amendment to this Form 10-K. ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ̈No x



The aggregate market value of voting stock held by non-affiliates of the Registrant at June 30, 2004 was $704,176.



Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x    No ̈



Number of Shares of Common
Stock outstanding at March 18, 2005: 3,597,479.



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PART I



FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K including Managements Discussion and Analysis of Financial Condition and Results of Operations, contains
statements concerning certain trends and other forward-looking information within the meaning of the federal securities laws. The words believe, may, will, estimate, assert,
continue, anticipate, intend, expect, and similar expressions identify these forward-looking statements. Such forward-looking statements are subject to uncertainties and factors relating to the
Companys operations and business environment and a number of other risks, uncertainties and assumptions, including those described in Risk Factors, all of which are difficult to predict and many of which are beyond the control of
the Company. The Company believes that the following factors, among others, could affect its future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements made by or on behalf of the
Company: (1) a negative perception of the Company with the decision to file for protection under Chapter 11 of the United States Bankruptcy Code in 2004, (2) the effectiveness of the Company having restructured the debt to provide adequate liquidity
to sufficiently improve the Companys financial position; (3) the Companys ability to complete its cost reduction initiatives; (4) weather conditions, particularly in the Great Lakes region, flooding, and/or water levels; (5) fluctuations
in energy, fuel and oil prices; (6) fluctuations in integrated steel production in the Great Lakes region; (7) fluctuations in Great Lakes and Mid-Atlantic construction activity; (8) economic conditions in California or population growth rates in
the southwestern United States; (9) the outcome of periodic negotiations of labor agreements; (10) changes in the demand for the Companys products due to changes in technology; (11) the loss, insolvency or bankruptcy of major customers,
insurers or debtors; (12) difficulty in hiring sufficient staff that is appropriately skilled and licensed, particularly for the vessel operations; (13) changes in environmental laws; (14) an increase in the number and cost of asbestos and silica
product liability claims filed against the Company and its subsidiaries and determinations by a court or jury against the Companys interest; (15) the insolvency of insurers, the effects of any coverage litigation with insurers or the adequacy
of insurance; and (16) changes in Federal or State law with respect to asbestos or silica product liability claims.



The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise. You should also consult the risk factors listed from time to time in the Companys other Securities and Exchange Commission filings.



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|ITEM 1. | BUSINESS
|------- | --------



A.    (1)    Oglebay Norton Company



The Company began its business in 1854 as an iron ore agency business. In the 1920s, the Company entered into the Great Lakes shipping, coal mining and
manufacturing industries, followed by its entry into docks and terminals in the 1930s; rail-to-barge coal transfer in the 1950s; and industrial minerals in the 1960s. Beginning in the late 1990s, the Company engaged in a series of acquisitions in
order to capitalize on core competencies in the industrial mineral industry as well as to expand the scope of operations to include the mining and processing of limestone and the production of lime. Today, after reincorporating as an Ohio
corporation in 2001, the Company mines, processes, transports and markets industrial minerals and aggregates. In addition, the Company owns strategically located, proven long-life reserves of high-quality limestone, industrial sand and mica. In
addition, the Company owns related mineral extraction equipment, processing plants and transportation equipment, including marine vessels and docks, trucks, railway lines and equipment. With these assets, the Company serves a broad customer base
primarily in four major categories: building products, energy, environmental and industrial. The Company enjoys a significant market share in each of the core markets, benefiting from long-term relationships with market-leading customers, many of
whom have multi-year purchase contracts with the Company. The primary North American Industry Classification System (NAICS) codes for the Company are 21231, 21232 and 48311.



On January 31, 2005, the Company and all of its direct and indirect wholly-owned subsidiaries emerged from protection under
Chapter 11 of the Bankruptcy Code pursuant to the Companys Plan of Reorganization (the Plan). The Plan became effective and the Company legally emerged from Chapter 11 on January 31, 2005 (the Effective Date); however,
the Company satisfied all material conditions precedent to the effectiveness of the Plan on December 27, 2004 and, therefore, used December 31, 2004 as the date for adopting Fresh-Start reporting in order to coincide with the Companys normal
financial closing for the month of December. See Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionOverviewBankruptcy Overview for further discussion.



The Company has aligned its businesses into three reporting
segments that share business strategies, are related by geography and product mix and reflect the way management evaluates the operating performance of the businesses. The operations are reported as: Great Lakes Minerals, Global Stone and
Performance Minerals:



| |  |  | Great Lakes Minerals mines and distributes limestone from four facilities located in northern Michigan.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Great Lakes Minerals also holds one of the largest fleets of self-unloading vessels on the Great Lakes, which is currently comprised of 12 vessels, operates two trans-loading dock
facilities, and provides transportation services for limestone, as well as for coal and iron ore.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Global Stone mines and processes limestone and manufactures lime at six operations in the mid-Atlantic and southeastern United States and one operation in the Great Lakes region.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Performance Minerals mines and processes industrial sands and mica at eight operations located in Ohio, North Carolina and the southwestern United States.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



The Company believes that it is one of the five largest producers of lime
and in the top twenty of the largest producers of limestone in the United States. The Company also believes that it is the fourth largest producer of industrial sands and the largest producer of muscovite mica in the United States.



For the fiscal years ended December 31, 2004 and 2003, the Company generated
consolidated net sales and operating revenues of approximately $435 million and $404 million, respectively. As of December 31, 2004 and 2003, the Company had approximately $680 million and $649 million, respectively, in assets and $570 million and
$562 million, respectively, in liabilities on a consolidated book basis. At January 1, 2005, the Companys workforce consisted of approximately 1,650 employees (excluding vessel relief employees), of which 48% were covered by collective
bargaining agreements.



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Additional information relating to the financial and operating data on a segment basis is set forth under
the heading Managements Discussion and Analysis of Financial Condition and Results of Operations contained in Part II hereof and in Note L to the consolidated financial statements contained in Part III hereof. For a description of
revenues and other financial information by geographic region, see Note L to the consolidated financial statements contained in Part III hereof.



(2)    Business Strategy



The Companys short-term strategy for 2005, following emergence from bankruptcy, is to strengthen the confidence of customers, suppliers and
employees and focus on post-emergence business operations. For the remainder of 2005 and longer-term, the Companys strategy is to enhance its market leadership position and maximize profitability and cash flows through the following actions:



Capitalize on the Companys strategic location and
ownership of quality limestone reserves in the Great Lakes region.    The strategic location of the Companys limestone reserves on the Great Lakes allows the Company to leverage logistics services and delivery of its
limestone to customers in the Great Lakes region. The Company mines, processes and transports limestone to its own docks or directly to customers on a delivered cost per ton basis at highly competitive rates. This can be accomplished either by
owning its fleet of marine vessels, as the Company does now, or by means of long-term contracts.



The acquisition of Erie Sand and Gravel Company (and several of its affiliates (together, Erie Sand and Gravel)) in January 2003 further
solidified the Companys position in the eastern Great Lakes region and expands the geographic scope of customers available to the segment. The Great Lakes Minerals segment attempts to maximize the efficiency of the Companys fleet of
marine vessels by negotiating contracts and dispatching vessels to facilitate backhauls of coal and other bulk commodities. A vessel pooling agreement with American Steamship Company further enhanced the Companys abilities to optimize marine
transportation logistics on the Great Lakes, both for itself and its customers.



Capitalize on demand for industrial minerals for building materials.    The Company has secured significant regional market share in the building materials market, particularly with respect
to construction aggregates and industrial fillers markets. Limestone and industrial sands are used to varying degrees by building materials manufacturers as filler material in paint, joint compound, roofing shingles, carpet backing and floor and
ceiling tiles. Additionally, the Companys limestone is used as aggregates in major construction projects such as highways, schools, hospitals, shopping centers and airport expansions. The Company intends to capitalize on its strong presence in
selected regional building materials markets by increasing its business with existing customers, expanding its customer base and providing a broader selection of products for customers to purchase.



Capitalize on increasing demand for minerals for environmental
remediation.    Public focus over environmental issues has resulted in an increase in the demand for lime and limestone used in environmental clean-up applications, including flue gas desulphurization, municipal waste sludge
treatment, industrial water treatment, drinking water treatment and hazardous waste remediation. The Clean Air Act, for example, requires the reduction of emissions, particularly sulfur, from coal-fired power plants and certain other industrial
processes. Ground limestone and lime are the principal agents used in the desulphurization process. These applications require limestone with specific chemical composition and a high degree of reactivity. The Company believes that its strategically
located, long-lived mineral reserves of high quality calcium carbonate and dolomitic limestone are well positioned to meet these requirements, enabling the Company to capitalize on this increasing demand now and well into the future.



Capitalize on market opportunities in the energy
segment.    The Company believes its industrial sands products are well positioned in the market place to serve the demand for high-purity silica sands used by oil and gas well service companies in the shallow-well and
deep-well fracturing process. The Companys Great Lakes Minerals segment has continued to increase its share of coal transported in its vessels for use by electric utilities in the Great Lakes region.



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B.    Principal Products and Services



(1)Great Lakes Minerals Segment



The Companys Great Lakes Minerals segment mines
limestone at four quarries located in northern Michigan and distributes it throughout the Great Lakes region. All four quarries have access to the Great Lakes and ship a majority of their output via bulk freighters. The segment holds one of the
largest reserves of metallurgical and chemical quality high-calcium carbonate and dolomitic limestone in the world and distributes these reserves on one of the largest fleets of self-unloading vessels on the Great Lakes. The fleet, which is
currently comprised of 12 vessels, provides transportation services for limestone as well as for coal and iron ore. As described elsewhere, the alliance with American Steamship Company provides access to 11 additional bulk freighters. Additionally,
the segment operates (1) dock terminals in Cleveland, Ohio, and Erie, Pennsylvania, which are important points of distribution on the Great Lakes, and (2) a sand dredging operation in Erie, Pennsylvania.



Industry



Limestone accounts for about three-quarters of crushed stone production in
the United States. Crushed limestone has five primary end uses: construction aggregates and building materials, chemical and metallurgical processes, cement and lime manufacturing, environmental and agricultural. As transportation costs are
significant in this industry, competition is limited based on geography. The chemical make-up of limestone varies by deposit, resulting in certain quarries having limited ability to meet performance specifications of certain end uses, such as flue
gas desulphurization in coal fired power plants and for scrubbers in waste-to-energy incineration. Products from the Great Lakes Minerals segment are used primarily as aggregate for construction of schools, hospitals, shopping centers and highways;
as an environmental cleaning agent for flue gas desulphurization, waste water treatment and soil stabilization; and as an essential chemical component in the manufacture of steel, paper and glass.



In general, demand for crushed limestone correlates with general economic
cycles, principally new construction demand and government spending on highway construction and other infrastructure projects. The segments long-lived mineral reserves and processing facilities allow capacity to meet increased demand during
up-turns in general economic activity. Demand for vessel transportation on the Great Lakes is also related to general economic cycles and more particularly to construction activity and industrial production in the Great Lakes region. The business in
the Great Lakes Minerals segment is seasonal. It is affected by weather conditions, such as the waterways freezing over, the closing/opening of the locks between the Great Lakes, and water levels of the Great Lakes and rivers. These factors cause
the actual number of days of operation to vary each year. Annually, the locks are required by law to close on January 15 and re-open around March 25, unless otherwise prescribed by the U.S. Coast Guard. Management believes that the overall Great
Lakes shipping market in which the Companys fleet competes operated at less than full capacity in 2004, 2003, 2002 and 2001, after approaching full capacity for the prior five years.



Operations



The Great Lakes Minerals segment operates four open pit quarries, 12
self-unloading vessels and two dock facilities, and has access to several additional docks on the Great Lakes. The Company assesses mineral reserves at all of its quarries and mines utilizing external consulting geologists and mining engineers. The
large reserves of the Great Lakes Minerals segment have been extensively mapped, and this mapping is regularly updated to provide the customer with specified, consistent-quality product. Limestone is extracted from the quarries by traditional
drilling and blasting techniques. Following extraction, trucks or trains are used to deliver the as-blasted limestone to a primary crusher. It is then processed through several stages of crushing and screening to size products that can
be sold as chemical limestone or aggregates.



Transportation
cost represents a significant portion of the overall delivered price of limestone. Limestone quarried at the segments operations is delivered, for the most part, by marine vessel, enabling the stone to be



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shipped to major markets located in excess of 800 miles away at a competitive price. The Company is the largest and only fully integrated producer and bulk
transporter of limestone on the Great Lakes. The Company can mine, process and transport stone to the Companys own docks or directly to customers on a delivered cost per ton basis using its own services or under long-term contracts.



The majority of the transportation services of the
Companys vessel fleet are conducted between U.S. ports on the Great Lakes. The largest vessels in the fleet transport primarily iron ore and coal. Smaller vessels can be scheduled with more flexibility and tend to be better suited to transport
limestone. The Company operates its vessels under a pooling agreement with American Steamship Company, which maintains a fleet of 11 modern, self-unloading Great Lakes vessels comparable in size to the Companys fleet. The agreement combines
the operations and customers of the two fleets to achieve more efficient overall operations and better customer service. With the pooling of vessels, the Company realizes improved trade patterns for all cargo, including limestone, resulting in more
efficient deployment and reduced delays across the combined fleet and better service to the customers of both companies. The agreement provides for the coordination of dispatch and other fleet operations but does not involve any transfer of assets.



The Great Lakes Minerals segment operates a bulk material dock
facility in Cleveland, Ohio, under an agreement with the Cleveland-Cuyahoga County Port Authority that was extended in 2002 through March 2017. The dock facility operates throughout the year, receiving cargo from Great Lakes vessels, storing it as
needed, and transferring it for further shipment via rail or water transportation. In 2003, the Port Authority concluded the relocation of an automated vessel loader to the dock facility. The new loader enables the Company to trans-load iron ore
pellets from its larger vessels to smaller vessels for delivery up the Cuyahoga River to a major customer. As a result of the vessel loader project, the Port Authority has postponed prior plans to construct a new access road that will enable the
facility to trans-ship cargoes by truck as well as rail and water. If the access road is constructed, the Company expects that the new road will enable limestone delivery by truck, expanding its ability to serve the limestone market. It is uncertain
at this time when the Port Authority will resume plans for the access road construction.



The Erie Sand and Gravel operation maintains an inventory; the majority of its product is received from the segments quarries in Michigan via marine vessel to a bulk materials dock in Erie, Pennsylvania, for
distribution into local markets. The operation has a vessel that dredges sand from Lake Erie, which is screened and sold into local markets as a filler in concrete and other construction applications. Additionally, the Erie dock is a distribution
point for other products including salt and coke breeze. The addition of Erie Sand and Gravel expands the geographic scope of the segment to the northwest Pennsylvania and western New York regions.



Customers



The segments primary customers include purchasers and producers of
construction aggregate and chemical limestone, integrated steel manufacturers, for whom the fleet transports iron ore, limestone and coal, and electric utility companies, for whom the fleet transports coal. The Company has long-established
relationships with many of these customers and provides services to many of them pursuant to long-term contracts.



For 2004, the Company estimates that approximately 85% of the tonnage hauled by the vessel fleet was shipped pursuant to multi-year contracts. The Company
estimates that, for 2004, industrial and chemical, building materials and construction, and energy customers accounted for approximately 46%, 41% and 13%, respectively, of this business segments revenue.



In 2004, iron ore shipments accounted for approximately 51% of the
fleets revenues, compared to 47% and 46% in 2003 and 2002, respectively. Coal accounted for approximately 32% of the fleets revenues in 2004 compared with 36% in 2003 and 32% in 2002. Shipments of limestone accounted for an estimated 17%
of the fleets revenues in 2004, compared with approximately 16% in 2003 and 22% in 2002. Approximately 71% of the limestone transported by the pooled fleet in 2004 came from the segments quarries.



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Competition



The building materials and construction aggregate industry in North America is highly fragmented. Many active operations are
small scale or wayside locations operated by state or local governments, usually to meet the requirements of highway contracts in more remote locations. There also are a number of large companies in the industry, including Vulcan Materials
Corporation, Martin Marietta Materials Inc., and Lafarge Corporation, whose operations are often centered on a particular geographic region. The Companys Great Lakes Minerals operations are centered on the Great Lakes region in this fashion
and compete primarily with Lafarge Corporation, which has facilities in the same geographic region. Given that transportation costs represent a significant portion of the overall cost of lime and limestone products, competition generally occurs
among participants in close geographic proximity. Additionally, the scarcity of high-purity limestone deposits for which the required zoning, extraction and emission permits can be obtained serves to limit competition from startup operations within
this limestone market. The physical characteristics and purity of the limestone can be a distinguishing competitive factor for chemical limestone and price is an important factor for both chemical limestone and construction aggregate.



The most important competitive factors impacting the segments marine
transportation services are price, customer relationships and customer service. Management believes that customers are generally willing to continue to use the same carrier assuming such carrier provides satisfactory service with competitive
pricing. The Companys fleet directly competes only among U.S. flag Great Lakes vessels because of the U.S. federal law known as the Jones Act. The Jones Act requires that cargo moving between U.S. ports be carried in a vessel that was built in
the United States, has a U.S. crew, and is owned (at least 75%) by U.S. citizens or corporations. As a result, Canadian-flagged Great Lakes vessels or foreign-flag oceanic vessels do not carry dry bulk cargo between U.S. ports. Moreover, the size
limitation imposed by the Welland Canal prevents large oceanic vessels from entering the Great Lakes. The competitive landscape has remained relatively stable over the last ten years. There were approximately 59 and 56 U.S. flag vessels in service
in 2004 and 2003, respectively. The Company is expected to continue to lay up one or two of its vessels in 2005 as a result of efficiencies realized from the pooling arrangement with American Steamship Company.



The pooled fleet will principally compete against two other similar-sized
U.S. flag Great Lakes commercial fleets in 2005: (1) The Interlake Steamship Company; and (2) The U.S.S. Great Lakes Fleet. The pooled fleet also competes with certain companies that operate smaller captive fleets and, to a lesser extent, with rail
and truck transportation companies serving the Great Lakes region.



(2)Global Stone Segment



Through a series of transactions in 2000, 1999 and 1998, the Company acquired businesses that now form its Global Stone segment. These operations supply
lime, crushed and ground limestone, construction aggregates and chemical limestone to a broad customer base in a variety of industries. The segments products are used primarily as a filler in building materials, as an environmental cleaning
agent for flue gas desulphurization, waste water treatment and soil stabilization, as a chemical in steel-making, paper-making and glass-making, and as an aggregate for construction of highways, shopping centers, hospitals and schools.



Industry



Lime is a value-added product derived from limestone, and is widely used in
a variety of manufacturing processes and industries, including iron and steel, pulp and paper, chemical, air purification, sewage, water and waste treatments, agricultural and construction. The wide range of end-uses and markets for lime offer some
protection from the economic cycles experienced by individual sectors such as the steel industry. Additionally, a high proportion of lime is sold into end-uses that, unlike some construction-related end-uses, have year-round requirements largely
unaffected by the weather. Limestone accounts for about three-quarters of crushed stone production in the United States. Transportation costs can be significant in this industry; therefore, competition is limited based on geography. Additionally,
many of these applications require stone with specific chemical



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composition and a high degree of reactivity. Crushed limestone has four primary end uses: construction aggregates and building materials; chemical and
metallurgical processes; cement and lime manufacturing; and agricultural purposes. High-purity chemical limestone like that processed by the segment may be processed into value-added products, such as lime or limestone fillers, or sold as chemical
limestone for use in manufacturing products as diverse as poultry feed mixtures, fiberglass and roofing shingles. Fillers, which are finely ground limestone powders, are used in a wide range of manufacturing processes including vinyl flooring,
carpet backing, adhesives, sealants and joint compound.



Operations



The Companys Global Stone
business segment produces products for the following primary end uses: construction aggregates and building materials, environmental, chemical and metallurgical processes, cement and lime manufacturing, and agricultural. The segment has seven lime
and/or limestone operations in North America that collectively extract and process high-purity limestone. These operations are primarily centered in northwest Georgia and along the Interstate 81 corridor from southern Pennsylvania through Virginia
and Tennessee.



The segment currently operates eight open pit
quarries and four underground mines. Limestone is extracted from the quarries and mines by traditional drilling and blasting techniques. In an open pit quarrying operation, the high-purity limestone is often covered by an overburden of construction
grade limestone that must first be removed. This overburden is used whenever possible to produce construction aggregates, usually in a dedicated crushing plant, in order to offset the overall cost of extracting high-purity limestone. Following
extraction, trucks are used to deliver the as-blasted limestone to a primary crusher. It is then processed through several stages of crushing and screening to size products that are saleable as chemical limestone and aggregates or ready
for further processing into lime, fillers and other value-added products. The Company assesses mineral reserves at all of its quarries and mines utilizing external consulting geologists and mining engineers.



High-purity limestone is processed into lime by heating it in a kiln. At
December 31, 2004, the Company believes its daily lime production capacity was approximately 2,800 tons. The capacity over a 24-hour period cannot be projected over a full calendar year because kilns require regular planned outages for maintenance
and equipment and are subject to unplanned outages customary with any mechanical plant. Typically, a kiln will operate between 92% and 96% of the available hours in any year. High-purity limestone is processed into fillers through grinding into
coarse, medium or fine grades. The segment primarily competes in coarse ground filler products used in the manufacture of roofing shingles and carpet backing.



Customers



In general, demand for lime and limestone correlates to general economic cycles, principally new construction demand, population growth rates and
government spending on highway construction and other infrastructure projects, which affect the demand for our customers products and services. This business segment has a broad customer base covering all sectors of the demand for lime and
limestone. These customers vary by the type of limestone products they demand: lime, chemical limestone or construction aggregate. The Company estimates that building products (including building materials and construction), environmental, and
industrial (including chemical) customers accounted for approximately 54%, 24%, and 22%, respectively, of this business segments revenue for 2004.



Transportation cost represents a significant portion of the overall cost of lime and limestone. As a result, the majority of lime and limestone production
is sold within a 500-mile radius of the producing facility, while aggregates tend to be sold within a 50-mile radius. At certain of the segments locations asphalt manufacturing customers have located their processing plants on the
Companys property. The Company believes that its Global Stone lime and limestone operations are strategically located near major markets for its products and that it holds a significant share of these markets.



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Competition



The building materials and construction aggregate industry in North America is highly fragmented. Many of the active
operations are small scale or wayside locations operated by state or local governments, usually to meet the requirements of highway contracts in more remote locations. There also are a number of large companies in the industry, including Vulcan
Materials Corporation, Martin Marietta Materials Inc. and Lafarge Corporation, whose operations are often centered on a particular geographic region.



Lime is primarily purchased under annual contracts. For many customers, the cost of lime is quite small in comparison to their overall production costs.
For 2004, the Company estimates that it was the fifth-largest producer of lime in North America, with the eight largest producers accounting for approximately 80% of total industry capacity. The Companys business segment accounted for
approximately 4% of the total North American market. The four largest companies with which the Company competes are privately owned. The most important competitive factors are the inherent quality and characteristics of the lime, price and ability
to meet spikes in demand.



Given that transportation cost
represents a significant portion of the overall cost of lime and limestone products, competition generally occurs among participants in close geographic proximity. In addition, the scarcity of high-purity limestone deposits for which the required
zoning, extraction and emission permits can be obtained serves to limit competition from startup operations within the limestone market.



(3)Performance Minerals Segment



The Companys Performance Minerals business segment is engaged in the mining and processing of high-quality specialty
mineral products, primarily industrial sands and muscovite mica. The segments businesses are focused on markets where excellent technical service and support are important to customers. Additionally, the segments businesses share common
end-use markets in building products and a geographic focus on the southwestern United States. The Company believes that the segment is the fourth-largest producer of industrial sands in the United States and the largest producer of muscovite mica
in North America. In September 2003, management announced its intention to sell the mica business. The Company received several offers to purchase the mica business during the marketing period. The Company did not sell the mica business for a
variety of reasons, but is currently working towards completing the sale with a designated buyer. On September 1, 2004, the Company temporarily suspended production at the Velarde, New Mexico, mica facility.



Performance Minerals products include: (i) fracturing sands, which are
used by oil and gas well service and exploration companies in the well fracturing process to hold rock structures open; (ii) specialty construction/industrial sands, which are used in the construction industry; (iii) silica flour used in the
manufacture of building materials such as roofing shingles, stucco, mortar and grout, and in fiberglass and ceramics; (iv) whole grain sands and silica flour used in glass-making; (v) recreational sands, which are used in the construction of golf
courses and other recreation fields, as well as in general landscaping applications; (vi) foundry sands, which are used in ferrous and non-ferrous metal die casting; (vii) filtration sands, which are used in liquid filtration systems; (viii) coated
sand for industrial abrasive uses; and (ix) mica products used as a functional filler in building materials such as joint compound, coatings and paints, as well as in the manufacture of numerous industrial and consumer products, including automotive
sound deadening materials, thermoplastics and cosmetics.



The
Companys mica operation produces the widest array of mica products in North Americamore than 40 different productsand is the only company currently supplying all major muscovite mica market segments. Performance Minerals also
produces two other specialty minerals as a byproduct of mica production: kaolin clay and feldspathic sand.



Industry



Industrial sands, often termed silica, silica sand and quartz sand, are defined as high silicon dioxide content sands.
While deposits of more common construction sand and gravel are widespread, industrial sand



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deposits are limited. The special properties of industrial sandspurity, grain size, color, inertness, hardness and resistance to high
temperaturesmake them often irreplaceable in a variety of industrial applications. Higher silica content allows for more specialized, higher-margin applications than construction sand and gravel. Mica, the segments other primary product,
is highly valued for its unique physical characteristics, including color, flexibility, durability, thermal properties and weight. Mica is used as a functional filler in building materials such as joint compound, coatings and paints, as well as in
the manufacture of numerous industrial and consumer products, including automotive sound deadening materials, thermoplastics and cosmetics. Mica is an essential component in many applications and in some cases can command premium pricing.



In general, demand for Performance Minerals products is
driven by a number of factors depending on end use. The three most important factors are demand for oil and natural gas, housing starts, and golf course construction activity in the southwestern United States where most of the Companys
industrial sand facilities are located. Oil and gas usage correlates with demand from oil and gas drilling service companies for fracturing, or frac, sands, which is the largest single market for the Companys industrial sands.
Housing starts correlate with demand for building products such as joint compound, paint, roofing shingles and grout, which are important end-uses for both mica and industrial sands. Demand for sand used in golf course construction and maintenance
relates primarily to southern California locations.



Operations



The Performance Minerals segment
has eight operations, five of which having strategically located, long-lived reserves of high-purity industrial sands and muscovite mica. Three of the segments operations function as distribution and/or processing points and are supplied by
either the segments quarries or by third parties. The segments operations are located in Ohio, North Carolina and the southwest United States.



The industrial sands operations include four open pit sand quarries with two integrated processing plants and one remote processing plant. In an
industrial sand quarry, the extracted sand is first washed to remove impurities like clay and dirt. The sand is then dried, screened and separated into different sized granules. At certain of the facilities, the sand is also pulverized into powder
for use in ceramic and other applications. All of the segments industrial sands operations have railroad and/or highway access.



The segments two mica operations are located in Kings Mountain, North Carolina and Velarde, New Mexico. The Kings Mountain complex includes two
mines and three plant sites that crush, dry, screen, mill and package mica products for shipment. Products include wet ground mica, dry ground mica, flake mica and micronized mica, as well as the byproducts kaolin clay and feldspathic sand. Several
different kinds of mica are surface treated with various chemicals to improve their performance in plastic products. The Velarde operation in northern New Mexico includes a surface mine and a plant that processes dry ground and flake mica. Both the
Velarde and Kings Mountain sites control sufficient mica reserves to meet all expected demand for many years to come.



Management has been in discussions to sell the Companys mica operations (Kings Mountain and Velarde operations). The Company did not sell the mica
business in 2004 for a variety of reasons, but is currently working towards completing the sale with a designated buyer. See Item 1. BusinessE. Subsequent Events for more information. On September 1, 2004, the Company temporarily
suspended production at the Velarde, New Mexico, mica facility.



Customers



The segment has a broad customer
base for its many industrial sands and mica products. The Company has a long relationship with the majority of its large customers in this segment. Industrial sands customers participate in the oil and gas well service, building materials, glass,
fiberglass, ceramic, foundry, filtration, and golf course and recreational industries. Mica is supplied to customers in the building materials, automotive, rubber and plastics and cosmetics industries, among others.



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For bulk industrial sands materials, transportation cost represents a significant portion of the overall
cost, and the majority of production is sold within a 200-mile radius of the producing facility. In contrast, for fracturing sands and most mica products, transporting the materials long distances is not economically prohibitive because of their
high unit value. Fracturing sands are transported throughout the entire North American continent to satisfy current supply needs. The Company estimates that the energy market, the building products (including building materials and construction)
market and the industrial market accounted for approximately 40%, 33% and 27%, respectively, of the business segments total revenue for 2004.



Competition



Competition is not limited to participants in close geographic proximity. However, the scarcity of high-purity sand deposits for which the required zoning
and extraction permits can be obtained serves to limit competition. Management estimates that the Company is the fourth-largest industrial sand producer in the country and the leader in the southwestern U.S. market. The principal competition comes
primarily from three companies: Unimin Corp., U.S. Silica Co., a wholly-owned subsidiary of Better Minerals, Inc., and Fairmount Minerals Ltd. The most competitive factors include the inherent physical characteristics of the sand, price and ability
to meet spikes in demand.



Due to limited sources, competition
in the muscovite mica industry is international. The Company estimates that it is the largest producer of muscovite mica in North America, accounting for approximately 45% of the market. Competition comes primarily from privately held international
businesses with the only public competitors in 2004 being Zemex, Inc. (acquired by Cementos Pacasmayo S.A.A. in March 2003) and Engelhard Corporation.



C.    Environmental, Health and Safety Considerations



The Company is subject to various environmental laws and regulations imposed by federal, state and local governments. The Company is continually
updating its Environmental, Health and Safety Initiative and in 2002 implemented a new comprehensive program. During the year 2001, certain plant operations were closed in conjunction with the fourth quarter restructuring of the Company. As a
result, the Company has incurred and may, in the future, be responsible for certain closure related expenses, including those for applicable reclamation of land to its original condition or to a condition as may be required by contract or law.



D.    Employees



At December 31, 2004, the Company employed approximately 1,650 people, not
including temporary relief workers, of whom 329 were salaried employees. Approximately 48% of the Companys employees are unionized, and the Company is party to eleven collective bargaining agreements with various labor unions. The Company
believes that it maintains good relations with each of these unions. All collective bargaining agreements that were to expire during 2004 have been ratified without any work stoppages. In 2005, one collective bargaining agreement representing
approximately 90 employees will expire. Management expects to be able to negotiate a new contract with this labor union.



E.    Subsequent Events



On January 31, 2005, the Company and all of its direct and indirect wholly-owned subsidiaries emerged from protection under Chapter 11 of the Bankruptcy
Code pursuant to the Companys Plan of Reorganization (the Plan). The Plan became effective and the Company legally emerged from Chapter 11 on January 31, 2005 (the Effective Date); however, the Company satisfied all
material conditions precedent to the effectiveness of the Plan on December 27, 2004 and, therefore, used December 31, 2004 as the date for adopting Fresh-Start reporting in order to coincide with the Companys normal financial closing for the
month of December. See Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionOverviewBankruptcy Overview for further discussion.



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As previously disclosed, management had been in discussions to sell the Companys mica operations
(Kings Mountain and Velarde operations). Due to the bankruptcy proceedings, the Company was not authorized to sell any assets. Upon emergence from bankruptcy and the installation of a new Board of Directors, plans to sell the mica operations have
resumed. On March 10, 2005, subsequent to the December 31, 2004 fiscal year-end but before the issuance of the 2004 year-end financial statements, the Board of Directors provided authorization for the sale of the mica operations. At that time, the
Company determined that the plan of sale criteria in FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, had been met. Due to the timing of when the Company satisfied the criteria for the mica
operations to be considered held for sale, the mica operations are considered as held and used in the December 31, 2004 financial statements. The carrying amount of the mica operations is approximately $15 million. The
Company believes that the Kings Mountain operation will be sold prior to the end of the second quarter of fiscal year 2005. The Company believes that the Velarde operation will be sold prior to the end of fiscal year 2005.



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RISK FACTORS



As discussed above under Forward-Looking Statements, the Company provides the following risk factor
disclosures in connection with its continuing efforts to qualify its forward-looking statements for certain safe harbor protections. Important factors currently known to management that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to, the following:



Risks Related to the Companys Financing and Recently Completed Reorganization



The Company emerged from Chapter 11 reorganization and has a history of recent losses.



The Company sought protection under Chapter 11 of the Bankruptcy Code in
February 2004. The Company incurred net losses of $106.075 million, $33.192 million and $6.608 million during the three fiscal years ended December 31, 2004, 2003 and 2002, respectively. See Managements Discussion and Analysis of
Financial Condition and Results of Operations and Selected Historical Consolidated Financial Data.



The Companys equity ownership and Board of Directors was replaced in connection with the Companys reorganization. While the Companys
current senior management has concentrated on refining the Companys business strategy, there can be no assurance that the Company will attain profitability or achieve growth in its operating performance.



The Company has substantial indebtedness and the covenants that are
contained in the Companys credit facility may significantly impact its future operations.



Although implementation of the Plan significantly reduced the Companys debt service obligations, the Company has indebtedness pursuant to the
post-emergence credit facility that is substantial in relation to the Companys shareholders equity. Although no assurances can be given, the Company believes that it will generate sufficient cash flow to meet its operating requirements,
including the payment of interest under the credit facility when due.



The post-emergence credit facility contains restrictive financial and operating covenants and prohibitions, including provisions that restrict the payment of dividends on the common stock, par value $0.01 per share of the Company (the
common stock) and cash dividends on the Series A convertible preferred stock, par value $0.01 per share, of the Company (the convertible preferred stock), and otherwise limits the Companys ability to make distributions
to holders of convertible preferred stock. The Companys leverage and restrictions contained in the credit facility require that a substantial portion of the Companys cash flow be dedicated to service interest expense and to make
mandatory payments of principal, which may impair the Companys ability to finance its future operations and capital needs and may limit its flexibility in responding to changing business and economic conditions and to business opportunities.



Substantially all of the Companys assets are
subject to various liens and security interests.



Substantially all of the Companys cash, receivables, equipment, inventory, real property and other assets are currently subject to various liens and security interests in favor of the lenders under the credit facility and in favor of
other creditors. If a holder of a security interest becomes entitled to exercise its rights as a secured party, it would have the right to foreclose upon and sell or otherwise transfer the collateral subject to its security interest, and the
collateral accordingly would be unavailable to the Company or its subsidiary owning the collateral and to other creditors of the Company or such subsidiary, except to the extent, if any, that such other creditors have a superior or equal security
interest in the affected collateral or the value of the affected collateral exceeds the amount of indebtedness in respect of which such foreclosure rights are exercised.



As a result of Fresh-Start reporting rules, the Companys historical financial information will not be comparable
with its financial information for periods ending after its emergence from bankruptcy.



As a result of the consummation of the Plan and the transactions contemplated thereby, the Company is subject to the Fresh-Start reporting rules as of
December 31, 2004. Accordingly, the Companys financial



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condition and results of operations as of December 31, 2004 and for periods ending after December 31, 2004 will not be comparable to the Companys
financial condition or results of operations reflected in the Companys consolidated historical financial statements published before its emergence from bankruptcy and included elsewhere in this Annual Report on Form 10-K.



The Companys Directors may change its current long-range plan.



As a result of the Companys financial
restructuring, the Board of Directors includes only two Directors who were on the Companys Board of Directors prior to the Effective Date of the Plan. Five of the Companys Directors, who constitute a majority, were designated by holders
of the Companys 10% Senior Subordinated Notes due February 1, 2009 (which were cancelled as of the Effective Date of the Plan) (the Senior Subordinated Notes) who were party to the commitment agreement and who received shares of
convertible preferred stock, including one such Director who was designated by such holders of Senior Subordinated Notes who became holders of common stock. The Companys Directors may make changes, which could be material, to the
Companys business, operations and current long-range plan described in this Annual Report on Form 10-K. It is impossible to predict what these changes will be and the impact they will have on the Companys future results of operations and
share prices.



The large number of shares eligible for
public sale could cause the Companys stock prices to decline and make it difficult for the Company to sell additional equity securities.



As of January 31, 2005, the holders of allowed Senior Subordinated Notes claims owned 91.7% of the Companys outstanding shares of common stock and
the holders of allowed Senior Subordinated Notes claims and certain third party accredited investors party to the commitment agreement owned 100% of the Companys outstanding shares of convertible preferred stock. Certain of these individuals
and institutions are not in the business of holding equity on a long-term basis. Sales by these shareholders of a substantial number of shares could significantly reduce the market price of the common stock or the convertible preferred stock.
Moreover, the perception that these shareholders might sell significant amounts of the common stock or convertible preferred stock could depress the trading price of the shares for a considerable period. Sales of these shares, and the possibility of
these sales, could make it more difficult for the Company to sell equity or equity-related securities in the future at a time, and price, that it considers appropriate.



The risks related to the Companys business, combined with its leverage and limited capital resources, could
negatively impact its future.



The Companys
principal sources of funds are expected to be operating revenues, cash and cash equivalents and funds available for borrowing under the credit facility. There can be no assurance that these funds will be sufficient to enable the Company to meet its
cash requirements on a consolidated basis. If the anticipated levels of revenues are not achieved because of decreased demand for the Companys product or weakness in the overall market for minerals and aggregates, or if expenses exceed the
level the Company contemplates, the current sources of funds may be insufficient to meet the Companys cash requirements in the future. Further, the Companys operations will be subject to the risks discussed below in Risk
FactorsRisks Related to the Companys Business. Should any of the potential adverse developments referred to in those risk factors occur, the Companys available capital resources may prove insufficient. In the event that its
available capital resources are insufficient, the Company would need to take additional steps to increase revenues, curtail expenses, sell assets or raise additional capital. There is no assurance that these approaches would be successful, and even
if successful, these approaches could trigger other adverse effects on the Companys business or operating results or financial condition.



A major portion of the Companys bank debt consists of variable-rate obligations, which subjects the Company to interest rate fluctuations.



The Companys credit facilities are secured by
accounts receivable, inventory and property, plant and equipment. The Companys credit facilities are variable-rate obligations, which expose the Company to interest



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rate risks. If interest rates increase, the Companys debt service obligations on its variable-rate indebtedness would increase even if the amount
borrowed remained the same, resulting in a decrease in the Companys net income.



Risks Related to the Companys Business



The Companys operations are cyclical and demand for its products fluctuates, which could adversely affect the Companys results of operations.



All of the Companys operations are cyclical. Further, the Company experiences increases and decreases in profitability
throughout the year resulting mostly from fluctuating demand for its products. Demand in the markets served by the Companys industries is influenced by many factors, including the following:



| |  |  | global and regional economic conditions;
| | - |  | ----------------------------------------



| |  |  | fluctuations in energy, fuel, oil and natural gas prices and the availability of such fuels;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | declines in steel production;
| | - |  | -----------------------------



| |  |  | changes in residential and commercial construction demands, driven in part by fluctuating interest rates and demographic shifts, especially in the Great Lakes and Mid-Atlantic
regions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in demand for the Companys products due to technological innovations;
| | - |  | ------------------------------------------------------------------------------



| |  |  | changes in environmental laws and regulations;
| | - |  | ----------------------------------------------



| |  |  | changes in weather;
| | - |  | -------------------



| |  |  | prices, availability and other factors relating to the Companys products;
| | - |  | --------------------------------------------------------------------------



| |  |  | demand for automobiles and other vehicles;
| | - |  | ------------------------------------------



| |  |  | the substitution of plastic or other materials for glass;
| | - |  | ---------------------------------------------------------



| |  |  | labor strikes and costs at the Companys customers;
| | - |  | ---------------------------------------------------



| |  |  | population growth rates; and
| | - |  | ----------------------------



| |  |  | government spending on road and other infrastructure construction.
| | - |  | ------------------------------------------------------------------



The Company cannot predict or control the factors that affect demand for its products and services. Negative developments in the above factors, among
others, would cause the demand for and supply of the Companys products and services to suffer, which could adversely affect the Companys results of operations.



The Company sells its products and services in highly competitive markets, and if it fails to compete effectively, its
results of operations could be adversely affected.



The Company sells its products and services in highly competitive markets. The Company believes that, for all of its business segments, price, product quality, product characteristics, location and customer service are the most significant
competitive considerations. In many of the Companys markets, it may face competition from large companies that have greater financial resources and less debt, which may enable them to commit larger amounts of capital in response to changing
market conditions. The Company expects competitive pressures in its markets to remain strong. If the Company fails to compete effectively, its results of operations could be adversely affected.



Natural disasters, equipment failures, unavailability of fuel sources
and other unexpected events could increase the cost of operating the Companys business.



The mineral production and the marine transportation industries are inherently risky businesses the operations of which are subject to conditions beyond
the Companys control. The Companys mining operations



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are affected by weather and natural disasters, such as heavy rains and flooding, equipment failures and other unexpected maintenance problems, variations in
the amount of rock and soil overlying mineral deposits, variations in geological conditions, fires, explosions and other accidents, fluctuations in the price or availability of supplies and other matters. In recent years, the Global Stone
segments operations were negatively impacted by some of these events, including flooding, equipment failures and other maintenance problems. In addition, recent increases in the price of fuel necessary for mining, processing and shipping
operations have adversely affected, and may continue to adversely affect, operating costs. Any of these risks could result in damage to, or destruction of, the Companys mining properties or processing facilities, personal injury to its
employees, environmental damage, delays in mining or processing, losses or possible legal liability. The Company cannot predict whether it will suffer the impact of these and other conditions in the future.



The Company relies on the estimates of its mineral reserves, and if
those estimates are inaccurate, its results of operations could be adversely affected.



The Companys future success depends, in part, upon its ability to develop or acquire additional industrial mineral reserves and to profitably
extract those reserves. Although the Company believes that the depletion of its existing mineral reserves is unlikely for many years, it cannot state with certainty how long it will be profitable for the Company to extract its reserves in the
future. To increase the reserves and mining production, the Company must continue to develop and acquire reserves. It is difficult for the Company, and for other mining companies, to estimate quantities of additional recoverable reserves. The
Companys estimates of reserve data are based on independent studies as well as on its own studies. Its estimates of industrial mineral reserves and future net cash flows, however, depend upon a number of factors and assumptions which include:



| |  |  | historical production from the areas;
| | - |  | -------------------------------------



| |  |  | interpretation of geological, geophysical and chemical quality data;
| | - |  | --------------------------------------------------------------------



| |  |  | assumptions concerning effects of regulations by governmental agencies;
| | - |  | -----------------------------------------------------------------------



| |  |  | assumptions concerning future industrial mineral prices;
| | - |  | --------------------------------------------------------



| |  |  | assumptions concerning future market conditions and competitive environment;
| | - |  | ----------------------------------------------------------------------------



| |  |  | assumptions concerning future operating costs, severance costs and excise taxes; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | assumptions concerning development costs and reclamation costs.
| | - |  | ---------------------------------------------------------------



These factors and assumptions may vary considerably from actual results. For these reasons, the Companys reserve data may not be accurate. The
Companys actual production, revenues and expenditures likely will vary from these estimates, and these variances may be material. The Company cannot provide assurances that its attempts to maintain adequate reserves in the future will be
successful.



Mine closures entail substantial costs, and
if the Company closes one or more of its mines sooner than anticipated, its results of operations may be adversely affected.



If the Company closes any of its mines, revenues would be reduced unless the Company were able to increase production at any of its other mines, which may
not be possible. The closure of an open pit mine involves significant fixed closure costs, including accelerated employment legacy costs, severance-related obligations, reclamation and other environmental costs, and the costs of terminating
long-term obligations, including energy contracts and equipment leases. The Company bases its assumptions regarding the life of its mines on detailed studies it performs from time to time, but those studies and assumptions do not always prove to be
accurate. The Company accrues for the costs of reclaiming open pits, stockpiles, tailings ponds, roads and other mining support areas over the estimated mining life of its property. If the Company were to reduce the estimated life of any of its
mines, the fixed mine closure costs would be applied to a shorter period of production, which would increase production costs per ton produced and could significantly and adversely affect the



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Companys results of operations and financial condition. Further, if the Company were to close one or more of its mines prematurely, it would incur
significant accelerated employment legacy costs, severance-related obligations, reclamation and other environmental costs, as well as asset impairment charges, which could materially and adversely affect the Companys financial condition.



Applicable statutes and regulations require that mining
property be reclaimed following a mine closure in accordance with specified standards and an approved reclamation plan. The plan addresses matters such as removal of facilities and equipment, regrading, prevention of erosion and other forms of water
pollution, revegetation and post-mining land use. The Company may be required to post a surety bond or other form of financial assurance equal to the cost of reclamation as set forth in the approved reclamation plan. The establishment of the final
mine closure reclamation liability is based upon permit requirements and requires various estimates and assumptions, principally associated with reclamation costs and production levels. Although the Company believes, based on currently available
information, it is making adequate provisions for all expected reclamation and other costs associated with mine closures for which it will be responsible, the Companys business, results of operations and financial condition would be adversely
affected if such accruals were later determined to be insufficient.



The Companys business and its customers businesses are subject to extensive environmental and health and safety regulations that impose, and will continue to impose, significant costs and liabilities, and future
regulations could increase those costs and liabilities, which could adversely affect the Companys results of operations.



The Company is subject to a variety of federal, state and local regulatory requirements relating to the environment, including those relating to its
handling of hazardous materials and air and wastewater emissions. Some environmental laws impose substantial penalties for noncompliance, and others, such as the Federal Comprehensive Environmental Response, Compensation, and Liability Act and the
Resource Conservation and Recovery Act, impose strict, retroactive and joint and several liability upon persons responsible for releases of hazardous substances. If the Company fails to comply with present and future environmental laws and
regulations, it could be subject to liabilities or its operations could be interrupted. In addition, future environmental laws and regulations could restrict the Companys ability to expand its facilities or extract its mineral deposits or
could require the Company to acquire costly equipment or to incur other significant expenses in connection with its business. There can be no assurance that future events, including changes in any environmental requirements and the costs associated
with complying with such requirements, will not have a material adverse effect on the Company.



In addition to environmental regulation, the Company is also subject to laws relating to human exposure to crystalline silica. The Company believes that it materially complies with governmental requirements for
crystalline silica exposure and emissions and other regulations relating to silica and plans to continue to comply with these regulations. Several federal and state regulatory authorities, including the Mining Safety and Health Administration, may
continue to propose changes in their regulations regarding workplace exposure to crystalline silica. The Company cannot guarantee that it will be able to comply with any new standards that are adopted or that these new standards will not have a
material adverse effect on its operating results by requiring the Company to modify its operations or equipment or shut down some of its plants. Additionally, the Company cannot guarantee that the Companys customers will be able to comply with
any new standards or that any such new standards will not have a material adverse effect on its customers by requiring them to shut down old plants or to relocate plants to locations with less stringent regulations that are further away from the
Company. Accordingly, the Company cannot at this time reasonably estimate its costs of compliance or the timing of any costs associated with any new standards, or any material adverse effect that any new standards will have on its customers and,
consequently, on its operations.



The Company is also subject
to various lawsuits relating to the exposure of persons to asbestos and silica. See Risk FactorsHealth issues and litigation relating to silica and asbestos could adversely affect the Companys financial results.



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The Companys mining business is subject to other extensive regulations, including licensing,
plant and wildlife protection and reclamation, that impose, and will continue to impose, significant costs and liabilities, and future regulations could increase those costs and liabilities, which could adversely affect the Companys results of
operations.



In addition to the regulatory matters
described above, the industrial minerals and aggregates industries are subject to extensive governmental regulation on matters such as permitting and licensing requirements, plant and wildlife protection, wetlands protection, reclamation and
restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. The Companys
future success depends, among other things, upon the quantity of its industrial minerals and aggregates deposits and its ability to extract these deposits profitably. As discussed above, it is difficult for the Company to estimate quantities of
recoverable deposits, in part due to future permitting and licensing requirements. The Company believes it has obtained all material permits and licenses required to conduct its present mining operations. However, the Company will need additional
permits and renewals of permits in the future. The Company may be required to prepare and present data to governmental authorities pertaining to the impact that any proposed exploration or production activities may have upon the environment. New
site approval procedures may require preparation of archaeological surveys, endangered species studies and other studies to assess the environmental impact of new sites. Compliance with these regulatory requirements is expensive, requires an
investment of funds well before the potential producer knows if its operations will be economically successful and significantly lengthens the time needed to develop a new site. Finally, obtaining or renewing required permits is sometimes delayed or
prevented due to community opposition and other factors beyond the Companys control. New legal requirements, including those related to the protection of the environment, could be adopted that could materially adversely affect the
Companys mining operations (including the ability to extract mineral deposits), its cost structure or its customers ability to use the Companys industrial minerals or aggregates products. Accordingly, there can be no assurance that
current or future mining regulation will not have a material adverse effect on the Companys business or that it will be able to obtain or renew permits in the future.



The Company relies heavily on third party transportation, which is subject to rate fluctuations and rail, shipping and
trucking hazards.



Other than in the Great Lakes
region, the Company relies heavily on railroads and trucking companies to ship its industrial minerals and aggregates products to customers. Because freight costs represent a significant portion of the total cost to the customer, fluctuations in
freight rates can change the relative competitive position of the Companys production facilities. Rail, shipping and trucking operations are subject to various hazards, including extreme weather conditions and operating hazards, as well as
slowdowns due to labor strikes and other work stoppages. If the Company is unable to ship its products as a result of the railroads or shipping or trucking companies failing to operate or if there are material changes in the cost or availability of
rail, shipping or trucking services, the Company may not be able to arrange alternative and timely means to ship its products, which could lead to interruptions or slowdowns in its businesses and, therefore, have a material adverse effect on the
Company.



The Company depends on its seamen employees,
and on its existing vessels, which require regular and unanticipated maintenance and impose significant costs on the Company.



The Companys newest Great Lakes vessel was commissioned in 1981 and the oldest in 1925. The relatively long life of the Companys vessels is
due to a scheduled program of regular winter maintenance, periodic renovation and minimal corrosion because they operate only in fresh water. In general, the Company must spend more money to maintain a vessel in good operating condition as the age
of the Companys vessel increases. However, the Companys Great Lakes shipping operations might not be profitable enough in the future to justify spending the necessary money on maintenance to keep the vessels in service. The
Companys vessels depend upon complex mechanical systems for both propulsion and unloading cargo. If any of these systems fail, the Company may be forced to take the affected vessel out of service. If it does this, the Company will lose the



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revenue and earnings associated with that vessel. Currently, there is a shortage of skilled and licensed merchant seamen. If the Company cannot hire
qualified seamen to operate the Companys vessels, it may be forced to reduce its shipping operations. If the Company does this, it will lose the associated expected revenues and earnings. In addition, although the Companys vessels are
insured, if the Company suffers catastrophic damage to a vessel or loss of life of seamen employees, the insurance proceeds may not cover the cost of a new vessel or any damages related to such loss of life.



In addition, in early 2002, the Company entered into a pooling agreement with
American Steamship Company, which operates a fleet of 11 modern, self-unloading Great Lakes vessels comparable in size to the Companys fleet. The agreement combines the operations and customers of the two fleets to achieve more efficient
deployment and reduced delays across the combined fleet and better service to the customers of both companies. If American Steamship Company refuses or is unable to honor its commitments under the pooling agreement, the Companys results of
operations could be materially affected.



The Company is
subject to potential increases in competitive pressure from other modes of transportation.



Aside from dealing with the impact on profitability resulting from such factors as changes in water levels and the congestion of the ports and locks
serving the Great Lakes, the shipping component of the Great Lakes Minerals segment must compete with the price and availability of other ships and other modes of transportation, including railroads and trucks. The shipping component of the Great
Lakes Minerals segment could face additional competitive pressures if the Merchant Marine Act of 1920 as amended, otherwise known as the Jones Act, is repealed. The Jones Act requires that cargo moving between U.S. ports be carried in a vessel that
was built in the United States, has a U.S. crew and is owned, at least 75%, by U.S. citizens or corporations. If the Jones Act is repealed, the Company may be unable to compete successfully with new competitors that could enter the market.



The Companys sales and earnings are subject to
significant fluctuations as a result of the cyclical nature of the steel industry.



The Companys net sales to the steel industry accounted for 17% of the Companys total revenue in each year of 2004, 2003 and 2002. The steel industry is highly cyclical, sensitive to general economic
conditions and dependent on the condition of certain other industries. As a result, the demand for steel products is generally affected by macroeconomic fluctuations in the United States and global markets in which steel companies sell their
products. Over the past few years, a significant number of domestic steel companies, some of which had been the Companys customers, entered bankruptcy proceedings. The continued or future loss of customers in the steel industry could have an
adverse impact on the Companys results of operations.



Because the Company experiences seasonal fluctuations in its sales, its quarterly results will fluctuate, and its annual performance will be affected by those fluctuations.



The Companys businesses are seasonal, meaning that it experiences
higher levels of activity in some periods of the year than in others. For example, the Companys mining operations experience weaker demand during the winter months, when weather conditions can affect the shipping, road and rail distribution of
products and the use of industrial sands, lime and limestone for construction. In addition, the Company is ordinarily able to operate its vessels on the Great Lakes for about 259 days per year beginning in early April and continuing through
mid-December. However, weather conditions and customer demand cause increases and decreases in the number of days the Companys vessels actually operate.



The Company depends on a limited number of customers, and the loss of, or significant reduction in, purchases by its largest customers could
adversely affect the Companys operations.



During 2004, the Companys top ten customers represented 31% of its sales. These customers might not continue to purchase these levels of the Companys products and services in the future due to a variety of



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reasons. For example, some of the Companys top customers could go out of business or, alternatively, be acquired by other companies who purchase the
same products and services provided by the Company from other third party providers. Although the Company believes it has a diverse customer base, if certain major customers substantially reduce or stop purchasing the Companys products or
services, the Company could suffer a material adverse effect on its operating results.



The Companys profitability could be negatively affected if it fails to maintain satisfactory labor relations.



As of December 31, 2004, various labor unions represented about 48% of the Companys employees. All collective
bargaining agreements that were to expire during 2004 have been ratified without any work stoppages. In 2005, one collective bargaining agreement representing approximately 90 employees will expire. Management expects to be able to negotiate a new
contract with this labor union. If the Company is unable to renegotiate acceptable collective bargaining agreements with these unions in the future, it could experience, among other things, strikes, work stoppages or other slowdowns by its workers
and increased operating costs as a result of higher wages, health care costs or benefits paid to its union employees. Although the Company considers its current relations with the employees to be good, if it does not maintain these good relations,
the Company could suffer a material adverse effect on its operating results.



The Companys expenditures for post-retirement and pension obligations could be materially higher than predicted if the Pension Benefit Guaranty Corporation asserts a claim against the Company or if the
Companys underlying estimates prove to be incorrect.



The Company sponsors qualified defined benefit pension plans that (1) are covered by Title IV of ERISA and (2) are subject to the minimum funding standards of the Internal Revenue Code and ERISA (the qualified pension plans).
According to regulations issued by the United States Treasury Department and the Pension Benefit Guaranty Corporation, the Company is liable for (1) any funding deficiency or unpaid Pension Benefit Guaranty Corporation premiums with respect to any
of the qualified pension plans and (2) any unfunded benefit liabilities if any of the qualified pension plans are terminated, either by the plan sponsor or by the Pension Benefit Guaranty Corporation. Although the Company does not currently intend
to terminate the qualified pension plans, they are not all fully funded. The Pension Benefit Guaranty Corporation has the right to seek available remedies under applicable law against the Company. However, the Pension Benefit Guaranty Corporation
has not yet filed a claim against the Company for this liability. If the Pension Benefit Guaranty Corporation were to enforce such a claim, the claim could significantly adversely affect the Companys financial condition and results of
operations.



Changing market or economic conditions, regulatory
changes or other factors may increase the Companys pension expenses or its funding obligations, diverting funds it would otherwise apply to other uses. The Company provides defined benefit pension plans and post-retirement health and life
insurance benefits to eligible union and non-union employees. The Companys pension expense and its required contributions to its pension plans are directly affected by the value of plan assets, the projected rate of return on plan assets, the
rate of return on plan assets and the actuarial assumptions the Company uses to measure its defined benefit pension plan obligations, including the rate that future obligations are discounted to a present value. If the Companys assumptions do
not materialize as expected, cash expenditures and costs that the Company incurs could be materially higher. Moreover, the Company cannot ensure that regulatory changes will not increase its obligations to provide these or additional benefits. These
obligations also may increase substantially in the event of adverse medical cost trends or unexpected rates of early retirement, particularly for bargaining unit employees for whom there is no retiree health care cost cap. Early retirement rates
likely would increase substantially in the event of a mine closure.



Additionally, the Companys pension and postretirement health and life insurance benefits obligations, expenses and funding costs would increase significantly if one or more of the mines in which the Company has invested is closed. A
mine closure would trigger accelerated pension and defined benefit pension plans and post-retirement health and life insurance benefits obligations. Any of these events could significantly adversely affect the Companys financial condition and
results of operations.



20



---

Health issues and litigation relating to silica and asbestos could adversely affect the
Companys financial results.



The Company is a
defendant in various lawsuits related to its businesses. These matters include lawsuits relating to the exposure of persons to asbestos and silica. With respect to silica claims, at December 31, 2004, the Company was a co-defendant in cases
involving about 23,000 claimants. At December 31, 2004, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims of about 73,000 claimants. The Company agreed to settle about 20,000 of these asbestos related claims,
to be paid primarily using funds in the insurance trust established pursuant to the Settlement Trust Agreement, made and entered into on August 28, 2003, by and among the Companys subsidiary ON Marine Services Company, underwriters at
Lloyds and London Market Company Signatories and Wells Fargo Bank Minnesota, N.A.



The severity of the risk of a potential material adverse effect on the Companys operating results from future asbestos claims cannot be measured, and is highly dependent on the rate of future claims, the cost to
defend, settle or otherwise resolve claims, the length of time to resolve claims and the impact of future legislative or other developments in the asbestos litigation arena. The Companys ability to fund asbestos settlements or judgments will
be subject to the availability of its remaining insurance coverage and to funds from operations, asset sales or capital-raising transactions. Excluding the impact of the most recent settlements, the Company has about $294 million of insurance
resources available to address both current and future asbestos liabilities. The Company has had an average of 13,750 asbestos claims asserted against it each year for the past five years. The average cost per claim for settlement or other
resolution for the past five years prior to the most recent settlements was about $1,000; the average cost per claim of the most recent settlements was about $3,000. The length of time to resolve claims varies on a case-by-case basis and can be
affected by decisions of management and opposing counsel. If there are no developments that reduce the impact of asbestos litigation or its costs to the Company, its available insurance may be insufficient to cover all future claims, and there could
be a material adverse affect on the Companys results of operations, liquidity and financial position.



The plaintiffs in these cases generally seek compensatory and punitive damages of unspecified sums based upon common law or statutory product liability
claims. Some of these claims have been brought by plaintiffs against the Company and other product manufacturer co-defendants, some of whom have also filed for bankruptcy protection. In addition, the Company is the target of hundreds of lawsuits
relating to the exposure by seamen employees to asbestos on the Companys vessels. Considering the Companys past operations relating to the use of asbestos and its past and present operations in which it mined or mines silica, it is
possible that additional claims may be made against the Company based upon similar or different legal theories seeking similar or different types of damages and relief.



Litigation is inherently unpredictable and subject to many uncertainties. Adverse court rulings, determinations of liability
or retroactive or prospective changes in the law could affect claims made against the Company and encourage or increase the number and nature of future claims and proceedings. Therefore, due to the uncertainties involved in any litigation,
management is unable to predict the outcome of litigation or the number of possible future claims and proceedings. There can be no assurance, however, that the Companys insurers will not become insolvent or that the Company will not be
involved in certain circumstances in coverage litigation with its insurers. In addition, even if the product liability claims are covered by insurance, there is no assurance that the amount paid in connection with a product liability claim will be
sufficient to cover the entire amount of the claim.



21



---

|ITEM 2. | PROPERTIES
|------- | ----------



The following map shows the locations of our quarries and operations.



LOGO



22



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The Companys principal operating properties are described below. The Companys executive
offices are located at North Point Tower, 1001 Lakeside Avenue, 15thFloor, Cleveland, Ohio 44114-1151, under a
lease expiring on December 31, 2013. The total area involved is approximately 22,329 square feet.



|                                                |  |                                                                  |  |              |  |                              
|----------------------------------------------- |  | ---------------------------------------------------------------- |  | ------------ |  | -----------------------------
|Location                                        |  | Use                                                              |  | Owned/Leased |  | Reserves(1) (years remaining)
|Corporate Headquarters Cleveland, Ohio          |  | Offices                                                          |  | Leased       |  | N/A                          
|                                                |  |                                                                  | 
|Great Lakes Minerals Cleveland, Ohio            |  | Marine transportation bulk commodity dock                        |  | Leased       |  | N/A                          
|                                                |  |                                                                  | 
|Cleveland, Ohio                                 |  | Offices                                                          |  | Subleased    |  | N/A                          
|                                                |  |                                                                  | 
|Rogers City, Cedarville and Gulliver, Michigan  |  | Limestone quarries, vessel loading facility and processing plant |  | Owned(2)     |  | See Chart                    
|                                                |  |                                                                  | 
|Erie, Pennsylvania                              |  | Marine transportation bulk commodity dock                        |  | Leased       |  | N/A                          
|                                                |  |                                                                  | 
|Toledo, Ohio                                    |  | Warehouse of spare parts                                         |  | Owned        |  | N/A                          
|                                                |  |                                                                  | 
|Global Stone Luttrell, Tennessee                |  | Limestone mine and lime works                                    |  | (3)          |  | See Chart                    
|                                                |  |                                                                  | 
|Chemstone Operations:                           |  |                                                                  |  |              |  |                              
|                                                |  |                                                                  | 
|Strasburg, Middletown, and Winchester, Virginia |  | Limestone quarries, processing plants and lime
works             |  | (4)          |  | See Chart                    
|                                                |  |                                                                  | 
|York, Pennsylvania                              |  | Limestone quarries and processing plants                         |  | Owned        |  | See Chart                    
|                                                |  |                                                                  | 
|Marble City, Oklahoma                           |  | Limestone mine and lime works                                    |  | Owned        |  | See Chart                    
|                                                |  |                                                                  | 
|Buchanan, Virginia                              |  | Limestone quarries and processing plants                         |  | Owned        |  | See Chart                    
|                                                |  |                                                                  | 
|Portage, Indiana                                |  | Limestone processing plant                                       |  | Owned        |  | N/A                          
|                                                |  |                                                                  | 
|Filler Products Operations:                     |  |                                                                  |  |              |  |                              
|                                                |  |                                                                  | 
|Chatsworth, Ellijay, and Cisco, Georgia         |  | Limestone mines and processing plants                            |  | (5)          |  | See Chart                    
|                                                |  |                                                                  | 
|Performance Minerals                            |  |                                                                  |  |              |  |                              
|California Operations:                          |  |                                                                  |  |              |  |                              
|                                                |  |                                                                  | 
|Orange County, California (San Juan Capistrano) |  | Sand quarry and processing plant                                 |  | (6)          |  | 9                            
|                                                |  |                                                                  | 
|Riverside, California                           |  | Sand processing plant                                            |  | Owned        |  | Supplied by thirdparties     
|                                                |  |                                                                  | 
|Bakersfield, California                         |  | Transloading facility                                            |  | Owned        |  | N/A                          
|                                                |  |                                                                  | 
|Bakersfield, California                         |  | Sand processing plant                                            |  | (7)          |  | Supply by Vocafacility       
|                                                |  |                                                                  | 
|Ohio Operations: Glenford and Howard, Ohio      |  | Sand quarries and processing plants                              |  | Owned        |  | See Chart                    



23



---

|                                        |  |                                     |  |                 |  |                             
|--------------------------------------- |  | ----------------------------------- |  | --------------- |  | ----------------------------
|Location                                |  | Use                                 |  | Owned/Leased    |  | Reserves(1) (yearsremaining)
|Texas Operations: Brady and Voca, Texas |  | Sand quarries and processing plants |  | Owned           |  | See Chart                   
|                                        |  |                                     | 
|Colorado Springs, Colorado              |  | Sand processing plant               |  | (8)             |  | Supplied bythird parties    
|                                        |  |                                     | 
|Kings Mountain, North Carolina          |  | Mica mines and processing plant     |  | Leased/Owned(9) |  | See Chart                   
|                                        |  |                                     | 
|Velarde, New Mexico                     |  | Mica mines and processing plant     |  | Owned           |  | See Chart                   

---

|(1) |  | Please see the chart below for further information on average annual production and reserves.
|--- |  | ---------------------------------------------------------------------------------------------

|(2) |  | The Company, through long-term agreements, leases the mineral rights at Cedarville and the majority of mineral rights at Rogers City.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | The lime works is owned and the limestone mine is subject to a mineral lease agreement through 2015.
|--- |  | ----------------------------------------------------------------------------------------------------

|(4) |  | The limestone quarry and lime works at Strasburg and Winchester and the processing plant at Middletown are owned. The limestone quarry at Middletown is subject to a 100-year mineral
lease agreement.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | The processing plants are owned and the limestone mines are subject to a 99-year mineral lease agreement.
|--- |  | ---------------------------------------------------------------------------------------------------------

|(6) |  | The processing plant is owned and the sand quarry is subject to a mineral lease agreement through 2013.
|--- |  | -------------------------------------------------------------------------------------------------------

|(7) |  | The sand processing plants are owned; however, they are located on land that is leased through December 31, 2005 with a right to renew for an additional five-year term.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | The processing plant is owned and the operation acquires feedstock under supply agreements that support current production levels.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------

|(9) |  | The mica mine and one processing plant are leased. The remaining processing plants are owned.
|--- |  | ---------------------------------------------------------------------------------------------



Set forth in the table below are the Company's annual average production tonnage, using the last 3 years and an estimate of the Company's
measured and indicated reserves.



|                                                |  |                             |      |  |                               |    
|----------------------------------------------- |  | --------------------------- | ---- |  | ----------------------------- | ---
|                                                |  | AverageAnnualProductionTons |      |  | Measuredand IndicatedReserves |    
|                                                |  | in Millions                 |     
|Great Lakes Minerals                            |  |                             |      |  |                               |    
|Rogers City, Cedarville, and Gulliver, Michigan |  | 17.3                        |      |  | 1,350.9                       |    
|Global Stone                                    |  |                             |      |  |                               |    
|Luttrell, Tennessee                             |  | 0.9                         |      |  | 36.0                          | (1)
|Strasburg, Middletown, and Winchester, VA       |  | 3.0                         |      |  | 165.7                         | (2)
|York, Pennsylvania                              |  | 1.6                         |      |  | 12.8                          |    
|Marble City, Oklahoma                           |  | 0.5                         |      |  | (3                            | )  
|Buchanan, Virginia                              |  | 1.0                         |      |  | 46.8                          | (4)
|Portage, Indiana                                |  | 0.5                         |      |  | n/a                           |    
|Chatsworth, Ellijay, and Cisco, Georgia         |  | 0.6                         |      |  | 21.0                          | (5)
|Performance Minerals                            |  |                             |      |  |                               |    
|Orange County, California                       |  | 0.6                         |      |  | (6                            | )  
|Riverside, California                           |  | 0.0                         | (9)  |  | n/a                           |    
|Bakersfield, California                         |  | 0.0                         | (10) |  | n/a                           |    
|Glenford and Howard, Ohio                       |  | 0.4                         |      |  | 5.7                           | (7)
|Brady and Voca, Texas                           |  | 0.9                         |      |  | 90.8                          | (8)
|Colorado Springs, Colorado                      |  | 0.1                         |      |  | 0.3                           |    
|Kings Mountain, North Carolina                  |  | 0.1                         |      |  | 4.2                           |    
|Velarde, New Mexico                             |  | 0.0                         | (11) |  | 2.5                           |    



24



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The Company has not included reserves that have not met the SEC Industry Guide 7 regulations. Below is additional
information on potential reserves (defined as resources) that the Company has.

---



|                         |  |              
|------------------------ |  | -------------
|(1) 30 Resource tonnage  |  | (in millions)
|(2) 9 Resource tonnage   |  | (in millions)
|(3) 109 Resource tonnage |  | (in millions)
|(4) 37 Resource tonnage  |  | (in millions)
|(5) 43 Resource tonnage  |  | (in millions)
|(6) 22 Resource tonnage  |  | (in millions)
|(7) 9 Resource tonnage   |  | (in millions)
|(8) 81 Resource tonnage  |  | (in millions)



The average annual production tonnage
rounded to zero in the above schedule, below is the actual average.

---

|(9) |  | 15,000
|--- |  | ------

|(10) |  | 11,000
|---- |  | ------

|(11) |  | 15,000
|---- |  | ------



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



On January 31, 2005, the Company and all of its direct and indirect wholly-owned subsidiaries emerged from protection under Chapter 11 of the Bankruptcy
Code pursuant to direct and indirect protection under the Plan. See Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionOverviewBankruptcy Overview for
further discussion.



The Company and certain of its
subsidiaries are involved in a limited number of claims and routine litigation incidental to operating the Companys current business. In each case, the Company is actively defending or prosecuting the claims. Many of the claims are covered by
insurance and none are expected to have a material adverse effect on the Companys financial condition.



Several of the Companys subsidiaries have been and continue to be named as defendants in a large number of cases relating to the exposure of people
to asbestos and silica. The plaintiffs in the cases generally seek compensatory and punitive damages of unspecified sums based upon the Jones Act, common law or statutory product liability claims. Some of these cases have been brought by plaintiffs
against the Company (or the Companys subsidiaries) and other marine services companies or product manufacturer co-defendants. Considering the Companys past and present operations relating to the use of asbestos and silica, it is possible
that additional claims may be made against the Company and the Companys subsidiaries based upon similar or different legal theories seeking similar or different types of damages and relief. Management is unable to estimate the Companys
potential exposure to unasserted claims. In the fourth quarter of 2004, the Company entered into a settlement agreement between one of its subsidiaries, ON Marine Services Company and certain tort plaintiffs to settle at least 750 of these claims
for $1.5 million utilizing certain insurance funds. Company funds will not be used to pay this settlement. The settlement was subject to the Bankruptcy Courts approval and confirmation of the Companys Plan. An order approving the
settlement and confirming the Plan was entered by the Bankruptcy Court on November 17, 2004.



Management believes that both the asbestos and silica product liability claims are covered by multiple layers of insurance policies from multiple sources
and an insurance trust. In particular, on December 31, 2004, prior to the settlement discussed above and below, the Company had approximately $294 million of insurance coverage available with respect to any asbestos liability claims, broken down as
follows: (1) about $63.2 million in cash in a trust on account of confidential settlement agreements between the Company and one of the Companys insurers, and (2) about $230.8 million on account of insurance policies. In addition, the Company
had over $800 million of insurance coverage available with respect to any silica liabilities. After consultation



25



---

with outside advisors, management believes that the insurers have no legitimate defenses to coverage under these policies. Management further believes that
the Company should be able to recover the full limits of the policies issued by solvent carriers.



At December 31, 2004, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims of about 73,000 claimants. In the fourth
quarter of 2004, the Company entered into settlement agreements between the Companys subsidiary ON Marine Services Company and certain asbestos tort plaintiffs, which were approved by the Bankruptcy Court. The settlements with these tort
plaintiffs resolve about 20,000 of the claims asserted against certain of the Companys affiliates as of December 31, 2004. Management estimates that the settlement payments under the settlement agreements for approximately 17,800 of these
claims will aggregate about $53.204 million and will be paid from the insurance trust established pursuant to the Settlement Trust Agreement, made and entered into on August 28, 2003, by and among the Companys subsidiary ON Marine
Services Company, underwriters at Lloyds and London Market Company Signatories and Wells Fargo Bank Minnesota, N.A. The remaining 2,200 settled claims will be paid upon the approval of the insurers paying the claims, and the total amount of
settlement payments under the settlement agreements relating to these asbestos claims cannot be determined until medical and exposure evidence is provided by such claimants. Management anticipates that any settlement payments made on account of such
claims will be paid under both the insurance trust and other of the Companys insurance policies. At March 15, 2005, 11,180 filed and un-filed pending claims have been submitted and approved for payment in accordance with the terms of the
settlement agreements. The total settlement amount for these 11,180 claims is $34.367 million. Separate from the settlements, approximately 4,100 claims were dismissed in Mississippi for lack of in personam jurisdiction. The Company received some
new claims during bankruptcy even with the automatic stay on litigation, and has experienced an increase in filings since emergence. Due to the quantity of dismissals, settlements and new filings, an accurate pending claim count is not possible at
this time. Total pending claims will be adjusted and reported quarterly after account for the dismissals, settlements and new filings.



Management believes that the remaining currently outstanding claims can be satisfied or otherwise resolved within the limits of the Companys
remaining available insurance. Management cannot predict whether or not the Companys available insurance will be adequate to cover any and all asbestos claims that arise in the future or that the Company will have the ability to otherwise
successfully defend or resolve such cases. If there are no developments that reduce the impact of asbestos litigation or its costs, the Companys available insurance may be insufficient to cover all future claims, and there could be a material
adverse effect on the Companys results of operations, liquidity and financial condition. The severity of this risk cannot be measured, and is highly dependent on the rate of future claims, the cost to defend, settle, or otherwise resolve
claims, the length of time to resolve claims and the impact of future legislative or other developments in the asbestos litigation arena. The Companys ability to fund asbestos settlements or judgments will be subject to the availability of its
remaining insurance coverage and to funds from operations, asset sales or capital-raising transactions. Excluding the impact of the most recent settlements, the Company has about $294 million of insurance resources available to address both current
and future asbestos liabilities. The Company has had an average of 13,750 asbestos claims asserted against it each year for the past five years. The average cost per claim for settlement or other resolution for the past five years prior to the most
recent settlements was about $1,000; the average cost per claim of the most recent settlements was about $3,000. The length of time to resolve claims varies on a case-by-case basis and can be affected by decisions of management and opposing counsel.
If there are no developments that reduce the impact of asbestos litigation or its costs to the Company, its available insurance may be insufficient to cover all future claims, and there could be a material adverse effect on the Companys
results of operations, liquidity and financial condition.



With
respect to silica claims, at December 31, 2004, the Company was a co-defendant in cases involving about 23,000 claimants. The Company has been and will continue to be responsible for funding a small percentage of all silica settlements and defense
costs. The Company continues to have insurance coverage; however, certain policies have retroactive premiums that will come due if claims accrue to those policies. The premiums are based upon actual and incurred losses and cannot be calculated until
losses are incurred. The likelihood of liability for the Company arising out of these claims is probable.



26



---

The exposure of persons to silica and the accompanying health risks have been and continue to be
significant issues confronting the industrial minerals industry in general, and specifically the Companys Performance Minerals segment. Proposed changes to standards for exposure to silica are under review by the United States Occupational
Safety and Health Administration. This review could result in more stringent worker safety standards or, in the alternative, requirements for additional action on the part of silica users regarding lower permissible exposure limits for silica. More
stringent worker safety standards or additional action requirements, including the costs associated with these revised standards or additional action requirements, and actual or perceived concerns regarding the threat of liability, or health risks,
including silicosis, associated with silica use, may affect the buying decisions of the users of the Companys silica products. If worker safety standards are made more stringent, if the Company is required to take additional action regarding
lower permissible exposure limits for silica, or if the Companys customers decide to reduce their use of silica products based on actual or perceived health risks or liability concerns, the Companys operating results, liquidity and
capital resources could be materially adversely affected. The extent of any material adverse effect would depend on the nature and extent of the changes to the exposure standards, the cost of meeting and the Companys ability to meet more
stringent standards, the extent of any reduction in the Companys customers use of the Companys silica products and other factors that cannot be estimated at this time.



On February 20, 2004, the Company and Oglebay Norton Specialty Minerals, Inc., a wholly-owned subsidiary, were named in an
action filed by Pueblo of Picuris, in the District Court of Taos County, New Mexico, seeking to quiet title to certain land upon which a mica mine is situated in Taos County, New Mexico. The action also includes a claim for money damages for
allegations of trespass, denial of access, damage to property and other related claims. The Company is investigating the facts and circumstances surrounding this matter to determine if the Company has liability or significant risk of adverse
finding. The Company is in the process of selling these assets, and, as a result of the sale, anticipates settling this claim at no cost to the Company.



On November 11, 2004, the Company and Global Stone PenRoc, LP, one of the Companys wholly-owned subsidiaries, received from National Gypsum Company,
a customer of Global Stone, a demand letter seeking payment of approximately $1.2 million in connection with allegedly defective limestone sold by Global Stone to National Gypsum in early 2004. Though the Companys investigation is in a very
preliminary phase, management believes that the total loss, if any, is significantly lower than the amount demanded.



On or about December 23, 2004, certain current and former members of the Companys Board of Directors were named as defendants in a complaint filed
by a former shareholder. Although the Company was not named in the complaint, it has agreed to indemnify the Directors pursuant to Ohio law, the Companys First Amended and Restated Articles of Incorporation, and certain indemnification
agreements the Company entered into with the named Directors. The Company maintains director and officer liability insurance, which has a deductible of $750,000. Although the outcome of the suit is not determinable at this time, management does not
anticipate expending funds in excess of the deductible for indemnity or defense.



On January 31, 2005, the Senior Secured Notes were redeemed at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance with the terms of the Senior Secured Notes purchase agreement.
However, certain Senior Secured Notes holders have filed a lawsuit claiming entitlement to default interest and penalties from the former Senior Subordinated Notes holders, based upon an argument that the Senior Subordinated Notes holders
claims in bankruptcy were subordinate to the claims of the Senior Secured Notes holders. The Bankruptcy Court ruled in favor of the Company, and Senior Subordinated Notes holders and the certain Senior Secured Notes holders have appealed. If the
Senior Secured Notes holders succeed in their appeal, it is possible that the positions of those common shareholders who exchanged their Senior Subordinated Notes for common stock could be diluted.



Litigation is inherently unpredictable and subject to many uncertainties.
Adverse court rulings, determinations of liability or retroactive or prospective changes in the law could affect claims made against the



27



---

Company and encourage or increase the number and nature of future claims and proceedings. Together with reserves recorded and available insurance, pending
litigation is not expected to have a material adverse effect on the Companys operations, liquidity or financial condition.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



No matter was submitted to a vote of the Companys security holders, through the solicitation of proxies or otherwise, during the fourth quarter of
the fiscal year covered by this report.



EXECUTIVE OFFICERS OF THE
REGISTRANT



See Item 10 of Part III for information
regarding the executive officers of the registrant.



28



---

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------



The Companys old common stock was traded on the NASDAQ National Market
(NASDAQ/NMS Symbol: OGLE) until the shares were delisted from trading, effective at the opening of business on March 3, 2004, as a result of the Companys Chapter 11 bankruptcy filing and low trading prices. Thereafter, the old common stock was
quoted on the over the counter Pink Sheets until the Companys old common stock was cancelled on January 31, 2005.



The Company emerged from bankruptcy on January 31, 2005. There currently is no public trading market for the Companys common stock or convertible
preferred stock. New common shares trade on the over the counter Pink Sheets under the symbol OGBY and convertible preferred shares trade on the over the counter Pink Sheets under the symbol OGBYP.



The following is a summary of the market range for the Companys common
stock during the period indicated:



|                                             |  |                  |       |     |   |      
|-------------------------------------------- |  | ---------------- | ----- | --- | - | -----
|                                             |  | Market Range (1)
|Quarterly Period                             |  | High             |       | Low
|2005                                         |  |                  |       |     |   |      
|1st(January 31, 2005 through March 18, 2005) |  | $                | 16.13 |     | $ | 13.65

---

|(1) |  | Represents market price after emerging from bankruptcy.
|--- |  | -------------------------------------------------------



On March 18, 2005, the closing bid price of the Companys common stock quoted on the over the counter Pink Sheets was $16.02 per share.
The quotations included above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The Company had 78 common and 20 convertible preferred shareholders of record at March
18, 2005.



The following is a summary of the market range for
the old common stock (which was cancelled on January 31, 2005) for each quarterly period in 2004 and 2003.



|                 |  |              |      |     |     |   |      |    
|---------------- |  | ------------ | ---- | --- | --- | - | ---- | ---
|                 |  | Market Range |     
|Quarterly Period |  | High         |      |     | Low |  
|2004             |  |              |      |     |     |   |      |    
|4th              |  | $            | 0.29 | (2) |     | $ | 0.02 | (2)
|3rd              |  |              | 0.25 | (2) |     |   | 0.08 | (2)
|2nd              |  |              | 0.92 | (2) |     |   | 0.10 | (2)
|1st              |  |              | 4.18 |     |     |   | 0.50 | (2)
|                 |  |             
|2003             |  |              |      |     |     |   |      |    
|4th              |  | $            | 4.93 |     |     | $ | 1.73 |    
|3rd              |  |              | 3.74 |     |     |   | 1.10 |    
|2nd              |  |              | 4.29 |     |     |   | 2.71 |    
|1st              |  |              | 8.00 |     |     |   | 2.97 |    

---

|(2) |  | Represents market price while operating in bankruptcy.
|--- |  | ------------------------------------------------------



The historical prices of the old common stock will not be indicative of the anticipated or prospective value or future trading price of or trading market
for the new common stock or the convertible preferred stock.



29



---

The Companys then-existing credit facilities prohibited the payment of cash dividends, and the
Company paid no dividends on the old common stock in 2004, 2003 or 2002. Subject to certain restrictions described below, the Company is required to pay dividends on the convertible preferred stock pursuant to its terms. However, the Company has not
paid and does not anticipate paying any dividends on the common stock in the foreseeable future.



The Company may be constrained from paying dividends by statutory limitations. Generally, the Company is not able to pay dividends if the payment would
exceed the surplus of assets minus liabilities, or if the Company is insolvent or would be rendered insolvent.



Further, covenants in certain debt instruments to which the Company is a party will restrict the Companys ability to pay dividends on the common
stock and cash dividends on the convertible preferred stock, and may prohibit the payment of dividends and certain other payments on the convertible preferred stock under certain circumstances.



In addition, because the Company is a holding company, its ability to pay
dividends on the convertible preferred stock may be limited by restrictions on the Companys ability to obtain funds for such dividends through dividends from the Companys subsidiaries.



On January 31, 2005, all of the Companys old common stock was cancelled
and 2,928,571 shares of common stock were issued and outstanding, all of which were issued pursuant to the Plan to the holders of the Senior Subordinated Notes. Also, the Plan included a management stock plan, which included 264,837 of awarded
restricted shares. In addition, as of the Effective Date of the Plan, and pursuant to the Plan, record holders of shares of old common stock with allowed interests under the Plan received warrants, exercisable until March 2, 2005, to purchase up to
576,256 shares of common stock at an exercise price of $10 per share. At that date, 404,071 shares of common stock were issued upon exercise of the warrants.



Pursuant to the commitment agreement, the convertible preferred stock constitutes a series of the preferred stock, and, as of the Effective Date of the
Plan, 8,500,000 shares of convertible preferred stock were issued and outstanding. The annual dividend payable on the convertible preferred stock is paid at a rate of 14.8275%. The holders of the convertible preferred stock may convert such shares
at any time into shares of common stock. In addition, subject to certain conditions, the shares of convertible preferred stock are redeemable by the Company after twelve months at various prices. On March 22, 2005, these conditions were met.



The Company intends to apply to list the convertible preferred
stock and the common stock on The NASDAQ National Market as soon as practicable when it meets the listing requirements. Such securities did not qualify for listing at the time they were issued, and the Company cannot guarantee that such securities
will ever be listed on The NASDAQ National Market. If the Company is not able to list such securities on The NASDAQ National Market, the Company intends to continue to cooperate with any registered broker-dealer who may seek to initiate price
quotations for the common stock and the convertible preferred stock on the OTC Bulletin Board. Again, however, the Company cannot guarantee that such securities will continue to be quoted on the OTC Bulletin Board or that an active trading market
will exist.



|ITEM 6. | SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
|------- | -----------------------------------------------



The following sets forth the Companys selected historical consolidated financial data as of and for the years ended December 31, 2004, 2003, 2002,
2001 and 2000.



The Companys consolidated balance sheets
as of December 31, 2004 and consolidated statements of operations for periods ending after December 31, 2004 will not be comparable to the historical consolidated financial statements published before emergence from bankruptcy because the
Companys financial statements for periods ending after emergence from bankruptcy will reflect the application of Fresh-Start reporting as



30



---

required by SOP 90-7 issued by the American Institute of Certified Public Accountants. Adopting Fresh-Start reporting will result in the determination of the
Companys reorganization value and the determination and assignment of estimated fair value to assets and liabilities in conformity with the procedures specified by FASB Statement No. 141 Business Combinations. Fresh-Start
reporting has changed the recorded value of the Companys tangible and intangible assets with an associated change in expense items as compared to the historical financial statements. In addition, Fresh-Start reporting adjustments were made to
reflect the changes specified in the Companys Plan. Finally, Fresh-Start reporting adjustments include accounting policy changes made by the newly emerged Oglebay Norton Company. Financial statement amounts of the Predecessor Oglebay Norton
Company (the Predecessor Company) will be separated from the Reorganized Oglebay Norton Company (the Reorganized Company) by a thick black line, signifying the lack of comparability. Please see Note B to the consolidated
financial statements for more information.



The consolidated
balance sheet data and the consolidated statement of operations data presented below as of December 31, 2004, 2003, 2002, 2001 and 2000, and for each of the years in the five-year period ended December 31, 2004, have been derived from the
Companys consolidated financial statements, which have been audited by Ernst & Young LLP, independent registered public accounting firm. The report issued by Ernst & Young LLP with respect to their audit of the Companys financial
statements for the year ended December 31, 2003 included an explanatory paragraph that describes an uncertainty about the Companys ability to continue as a going concern.



All of the information presented below should be read in conjunction with the information in the sections in this prospectus
titled Managements Discussion and Analysis of Financial Condition and Results of Operations, as well as the Companys audited consolidated financial statements and their accompanying notes, all of which are included on pages
F-1 through F-51.



31



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



(Dollars and shares in thousands, except per share amounts)



|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|----------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | --- | ---- | - | -------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | -------
|                                                                                                            |  | Year Ended December 31
|                                                                                                            |  | 2004                   |           |     | 2003 |   |          | 2002 |  |   | 2001    |   |  | 2000
|OPERATIONS                                                                                                  |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|Net sales and operating revenues                                                                            |  | $                      | 435,650   |     |      | $ | 404,229  |      |  | $ | 400,572 |   |  | $    | 404,211 |   |  | $ | 393,181
|                                                                                                            |  |                        |           |     |     
|Operating income (loss)                                                                                     |  |                        | 19,749    |     |      |   | (6,647   | )    |  |   | 34,625  |   |  |      | 15,208  |   |  |   | 51,019 
|(Loss) income before cumulative effect of accounting change                                                 |  |                        | (106,075  | )   |      |   | (31,801  | )    |  |   | (6,608  | ) |  |      | (18,815 | ) |  |   | 15,028 
|Cumulative effect of accounting change for asset retirement obligations (net of income tax benefit of $889) |  |                        | -0-       |     |      |   | (1,391   | )    |  |   | -0-     |   |  |      | -0-     |   |  |   | -0-    
|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|Net (loss) income                                                                                           |  | $                      | (106,075  | )   |      | $ | (33,192  | )    |  | $ | (6,608  | ) |  | $    | (18,815 | ) |  | $ | 15,028 
|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|                                                                                                            |  |                        |           |     |     
|PER SHARE DATA                                                                                              |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|                                                                                                            |  |                        |           |     |     
|(Loss) income before cumulative effect of accounting changebasic                                           |  | $                      | (20.27    | )   |      | $ | (6.21    | )    |  | $ | (1.32   | ) |  | $    | (3.76   | ) |  | $ | 3.02   
|Cumulative effect of accounting change for asset retirement obligations                                     |  |                        | -0-       |     |      |   | (0.27    | )    |  |   | -0-     |   |  |      | -0-     |   |  |   | -0-    
|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|Net (loss) incomebasic                                                                                     |  |                        | (20.27    | )   |      |   | (6.48    | )    |  |   | (1.32   | ) |  |      | (3.76   | ) |  |   | 3.02   
|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|(Loss) income before cumulative effect of accounting changeassuming dilution                               |  | $                      | (20.27    | )   |      | $ | (6.21    | )    |  | $ | (1.32   | ) |  | $    | (3.76   | ) |  | $ | 3.00   
|Cumulative effect of accounting change for asset retirement obligations                                     |  |                        | -0-       |     |      |   | (0.27    | )    |  |   | -0-     |   |  |      | -0-     |   |  |   | -0-    
|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|Net (loss) incomeassuming dilution                                                                         |  |                        | (20.27    | )   |      |   | (6.48    | )    |  |   | (1.32   | ) |  |      | (3.76   | ) |  |   | 3.00   
|                                                                                                            |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|                                                                                                            |  |                        |           |     |     
|Dividends per share                                                                                         |  |                        | -0-       |     |      |   | -0-      |      |  |   | -0-     |   |  |      | 0.60    |   |  |   | 0.80   
|                                                                                                            |  |                        |           |     |     
|Market price at December 31                                                                                 |  | $                      | 0.29      | (1) |      | $ | 4.21     |      |  | $ | 6.65    |   |  | $    | 15.50   |   |  | $ | 19.44  
|Book value at December 31                                                                                   |  | $                      | 21.00     | (1) |      | $ | 17.39    |      |  | $ | 23.20   |   |  | $    | 24.54   |   |  | $ | 30.80  
|Shares of old common stock outstanding at December 31                                                       |  |                        | 5,239     | (1) |      |   | 5,060    |      |  |   | 4,978   |   |  |      | 4,972   |   |  |   | 4,968  
|                                                                                                            |  |                        |           |     |     
|Average shares of old common stock outstandingbasic                                                        |  |                        | 5,233     | (1) |      |   | 5,125    |      |  |   | 5,025   |   |  |      | 4,998   |   |  |   | 4,975  
|Average shares of old common stock outstandingassuming dilution                                            |  |                        | 5,233     | (1) |      |   | 5,125    |      |  |   | 5,025   |   |  |      | 5,012   |   |  |   | 5,007  
|                                                                                                            |  |                        |           |     |     
|FINANCIAL CONDITION                                                                                         |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|Capital expenditures                                                                                        |  | $                      | 23,899    |     |      | $ | 19,165   |      |  | $ | 20,016  |   |  | $    | 26,875  |   |  | $ | 36,048 
|Working (deficit) capital                                                                                   |  |                        | (211,431) | (2) |      |   | (361,786 | )    |  |   | (55,322 | ) |  |      | 46,978  |   |  |   | 45,582 
|Total assets                                                                                                |  |                        | 679,784   | (2) |      |   | 649,831  |      |  |   | 687,467 |   |  |      | 680,149 |   |  |   | 700,046
|Capitalization:                                                                                             |  |                        |           |     |      |   |          |      |  |   |         |   |  |      |         |   |  |   |        
|Long-term debt, including current portion                                                                   |  |                        | 353,193   | (2) |      |   | 421,840  |      |  |   | 395,348 |   |  |      | 388,773 |   |  |   | 378,591
|Stockholders equity                                                                                        |  | $                      | 110,010   | (2) |      | $ | 88,004   |      |  | $ | 115,501 |   |  | $    | 121,998 |   |  | $ | 153,000

---

|(1) |  | Market price, book value and outstanding shares are based on the old common stock outstanding as of December 31, 2004.
|--- |  | ----------------------------------------------------------------------------------------------------------------------

|(2) |  | Amounts are not comparable to prior years due to application of Fresh-Start adjustments at December 31, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------



Results for 2004 do not include the Redi-Mix business unit of the Great Lakes
Minerals segment subsequent to its sale in the first quarter of 2004. Results for 2003 include Erie Sand and Gravel from its acquisition date in early January of 2003 and do not include the Lawn and Garden business unit of the Global Stone segment
subsequent to its sale in the fourth quarter of 2003. Results for 2000 include Michigan Limestone Operations and Global Stone Portage from their respective dates of acquisition in April and September of 2000.



32



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Financial Condition



Overview



Oglebay Norton Company and its consolidated subsidiaries (the Company) mines, processes, transports and markets industrial minerals and
aggregates. In addition, the Company owns strategically located, proven long-life reserves of high quality limestone, industrial sand and mica. The Company operates 22 plants across the United States, a fleet of self-unloading vessels, docks and
distribution terminals.



The Company serves a broad customer
base primarily in four major categories: building products, energy, environmental and industrial. The Company enjoys a significant market share in each of the core markets, benefiting from long-term contracts. The Company believes that it is one of
the five largest producers of lime and in the top twenty of the largest producers of limestone in the United States. The Company also believes that it is the fourth largest producer of industrial sands and the largest producer of muscovite mica in
the United States.



Demand for limestone products correlates
with the general economic cycles, principally new construction demand and government spending on highway construction and other infrastructure projects. Vessel transportation on the Great Lakes is also effected by general economic cycles and more
particularly to construction activity and industrial production in the Great Lakes region. The wide range of end-uses and markets for lime offer some protection from the economic cycles experienced by individual sectors such as the steel industry.
Additionally, a high proportion of lime is sold into end-uses that, unlike some construction-related end-uses, have year-round requirements largely unaffected by the weather. In general, demand for Performance Minerals products is driven by a
number of factors depending on end-use. The most important factors are demand for oil and natural gas, housing starts and golf course construction in the southwestern United States.



Recently, the Company emerged from bankruptcy, which it entered on February 23, 2004. The Company filed for bankruptcy to
pursue a financial restructuring that would permit the Company to reduce its indebtedness and provide more financial flexibility to implement its business strategy. The Company accomplished the goals it established when it started down the
restructuring path: preserve the business, achieve a sustainable capital structure, create the most value for creditors, and complete the process in as expedited a manner as possible. The outcome of these accomplishments and the much-improved market
conditions can be seen to some extent in the Companys 2004 results, and the Company expects that trend to continue in 2005. For more details on the bankruptcy, see Bankruptcy Overview.



Now that the Company has emerged from bankruptcy, its short-term plans are to
focus on strengthening the confidence of customers, suppliers and employees and focus on post-emergence business operations. Longer term, the Companys strategy is to enhance its market leadership positions and to maximize profitability and
cash flows by capitalizing on the following:



| |  |  | the strategic location and high quality of limestone reserves in the Great Lakes region;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the demand for industrial minerals for building materials;
| | - |  | ----------------------------------------------------------



| |  |  | the increasing demand for minerals for environmental remediation; and
| | - |  | ---------------------------------------------------------------------



| |  |  | the market opportunities in the energy segment.
| | - |  | -----------------------------------------------



Overall, the Company plans to expand its current markets and develop new markets for its limestone and limestone fillers businesses, while maximizing the
profitability of its sand, lime and marine businesses.



In
2005, the Companys principal sources of funds are expected to be operating revenues, cash and cash equivalents, and the funds available for borrowing under its post-emergence credit facility. The Company expects that the sources of funds are
sufficient to cover its operating expense, interest expense and capital expenditures. The Company will continue to focus on cash flow and debt levels in 2005.



33



---

Financial Condition(Continued)



Bankruptcy Overview.    Beginning in 1998, the Company incurred
significant debt in connection with a series of acquisitions. These acquisitions, which transitioned the Company into a diversified industrial minerals company, also resulted in a highly-leveraged balance sheet. When the U.S. economy slipped into
recession in 2001, the Companys debt became an increasing financial burden. Over the past three years, the Company has been impacted particularly by the decline of the nations integrated steel industry, rising energy costs and adverse
market conditions in certain segments of the commercial and residential building materials markets. Together, these factors resulted in decreased demand for limestone and mica from the Companys quarries and for the services of its Great Lakes
fleet. Continuing losses aggravated the Companys already significant debt load.



In spite of implementing restructuring initiatives to remedy the Companys heavily burdened balance sheet, the Company determined that, due to impending debt obligation defaults, it was necessary to complete the
Companys restructuring efforts under the protection of the Bankruptcy Code.



On February 23, 2004, the Company and all of its direct and indirect wholly-owned subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code to pursue a financial restructuring
that would permit the Company to reduce its indebtedness and provide more financial flexibility to implement its business strategy. The Plan was confirmed by the United States Bankruptcy Court for the District of Delaware (the Bankruptcy
Court) on November 17, 2004. The Plan became effective and the Company legally emerged from Chapter 11 on January 31, 2005. However, the Company satisfied all material conditions precedent to the effectiveness of the Plan on December 27,
2004 and, therefore, used December 31, 2004 as the date for adopting Fresh-Start reporting in order to coincide with the Companys normal financial closing for the month of December. The Plan provided that, among other things:



| |  |  | with the exception of (1) the Companys Senior Subordinated Notes in the aggregate principal amount of $100 million issued pursuant to the Indenture, dated as of February 1,
1999, between the Company as issuer and Norwest Bank Minnesota, National Association n/k/a Wells Fargo Bank MN, National Association, as indenture trustee (which Senior Subordinated Notes were cancelled as of the Effective Date of the Plan) and (2)
claims against the Company under or evidenced by an interest purchase agreement, dated as of April 14, 2000 (the interest purchase agreement), by and among the Company, Johnson Mining Inc., The Cary Mining Company, Inc., Michigan
Minerals Associates, Inc. and Michigan Limestone Operations Limited Partnership, as amended or modified (the MLO claims), all allowed nonpriority pre-petition claims against the Company (A) will be or have been paid in full in cash in
accordance with the Plan, (B) received collateral securing their allowed claims pursuant to the Plan or (C) were reinstated in accordance with the Plan;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | holders of allowed Senior Subordinated Note claims received their pro-rata distribution of 2,928,571 shares of common stock in full satisfaction of their claims, which represented
about 25.6% of the total voting power of and equity interests in the Company without giving effect to the conversion of the convertible preferred stock and without giving effect to the management stock plan;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the interest purchase agreement relating to the MLO claims was amended as set forth in the Plan and, as of the Effective Date of the Plan, was assumed (as amended) by the Company.
The MLO claims will be paid in accordance with the amended interest purchase agreement;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all of the shares of the old common stock outstanding as of the Effective Date of the Plan and any related options or similar rights were cancelled as of the Effective Date of the
Plan, and record holders of shares of old common stock with allowed interests under the Plan as of the close of business on the warrant distribution record date received warrants, exercisable until March 2, 2005, to purchase up to 576,256 shares of
common stock at an exercise price of $10 per share;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | holders of any intercompany claims did not receive any property under the Plan; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | in general, post-petition claims were reinstated and will be or have been paid by the Company in the ordinary course of business.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



34



---

Financial Condition(Continued)



Excluding the effects of the exercise of warrants and restricted shares issued pursuant to the
Management Stock Plan, there were 2,928,571 common shares outstanding as of the Effective Date, accounting for 25.6% of the total voting power of the equity interests.



It was a condition to the Plan of Reorganization that the Company raise new financing. To meet this condition, the Company
issued and sold an aggregate of 8,500,000 shares of convertible preferred stock pursuant to the rights offering and the commitment agreement. The Company used the net proceeds from the issuance and sale of the convertible preferred stock and
available cash and borrowings under the post-emergence credit facility to redeem the Senior Secured Notes at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance with the terms of the Senior Secured Notes
purchase agreement. The principal balance of the Senior Secured Notes was $84.677 million at December 31, 2004 and $85.1 million at January 31, 2005 when redeemed.



Pursuant to the rights offering, holders of the Companys Senior Subordinated Notes claims that were not parties to the
commitment agreement purchased an aggregate of 5,139,200 shares of convertible preferred stock at $10 per share for a total purchase price of $51.392 million. Pursuant to the commitment agreement, the subscribers purchased an aggregate of 3,360,800
shares of convertible preferred stock at $10 per share for a total purchase price of $33.608 million. Pursuant to the warrant offering, the Company issued an aggregate of 404,071 shares of common stock at $10 per share for a total purchase price of
$4.041 million. As of the Fresh-Start reporting balance sheet at December 31, 2004, the Company has outstanding about $353.2 million in debt under the post-emergence credit facility and about $111.9 million of other long-term liabilities. As a
result, interest expense will decline in comparison to the interest expense incurred by the Company in periods prior to the Effective Date of the Plan.



On January 31, 2005, the Senior Secured Notes were redeemed at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance
with the terms of the Senior Secured Notes purchase agreement. However, certain Senior Secured Notes holders have filed a lawsuit claiming entitlement to default interest and penalties from the former Senior Subordinated Notes holders based upon an
argument that the claims in bankruptcy were subordinate to the claims of the Senior Secured Notes holders. The Bankruptcy Court ruled in favor of the Company and Senior Subordinated Notes holders and the certain Senior Secured Notes holders have
appealed. If the Senior Secured Notes holders succeed in their appeal, it is possible that the positions of those common shareholders who exchanged their Senior Subordinated Notes for common stock could be diluted.



Fresh-Start Reporting.    The Companys
emergence from Chapter 11 bankruptcy proceedings resulted in a new reporting entity at the adoption of Fresh-Start reporting in accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 90-7,
Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (SOP 90-7) (Fresh-Start reporting). Despite a legal emergence from bankruptcy on January 31, 2005, the Company satisfied all
material conditions precedent to the effectiveness of the Plan on December 27, 2004. The Company used December 31, 2004 as the date for adopting Fresh-Start reporting in order to coincide with the Companys normal financial closing for the
month of December. The transactions which occurred during the four-days between December 27 and December 31 were not material as they represent less than 1% of operating income and total revenues and less than 2% of income before taxes. Upon
adoption of Fresh-Start reporting, a new reporting entity is created for accounting purposes and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values. Accordingly, the reported historical financial
statements of the Company prior to the adoption of Fresh-Start reporting for periods ended prior to December 31, 2004 are not comparable to those of the Reorganized Company. In this Annual Report on Form 10-K, references to the Companys
operations and cash flows during the periods ended in fiscal 2004, 2003 and 2002 refer to the Predecessor Company.



SOP 90-7 requires that financial statements for the period following the Chapter 11 filing through the bankruptcy confirmation date distinguish
transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, revenues, expenses, realized gains and



35



---

Financial Condition(Continued)



losses and provisions for losses directly associated with the reorganization and restructuring of the business, including adjustments to fair value assets
and liabilities and the gain on the discharge of pre-petition debt, are reported separately as reorganization items, net, in the Predecessor Companys consolidated statement of operations.



Fresh-Start Adjustments.    In accordance with
Fresh-Start reporting, all assets and liabilities are recorded at their respective fair values as of December 31, 2004. Such fair values represent the Companys best estimates based on independent appraisals and valuations.



To facilitate the calculation of the enterprise value of the Reorganized
Company, the Company developed a set of five-year financial projections. Based on these financial projections, the enterprise value was determined by a financial advisor, using various valuation methods, including (i) a comparison of the Company and
its projected performance to the market values of comparable companies, (ii) a review and analysis of several recent transactions of companies in similar industries to the Company, and (iii) a calculation of the present value of the future cash
flows derived from the financial projections, including an assumption for a terminal value, discounted back at the Reorganized Companys estimated weighted average cost of capital. The estimated enterprise value is highly dependent upon
achieving the future financial results set forth in the projections as well as the realization of certain other assumptions, none of which are guaranteed. For Fresh-Start reporting purposes, the estimated enterprise value of the Reorganized Company
was calculated to be $385 million assuming an average debt balance of $275 million. The implied value for the common stock is $25 million. The implied value for the convertible preferred stock is $85 million. In applying Fresh-Start reporting,
adjustments to reflect the fair value of assets and liabilities, on a net basis, and the restructuring of the Companys capital structure and resulting discharge of the senior lenders pre-petition debt, resulted in net reorganization
expense of $59.413 million. In addition, the Company incurred $18.779 million in reorganization expenses in 2004 primarily related to legal and professional services.



Strategic Overview.    The Company intends to continue to pursue the strategic operating plan it
put in place over the last two years, but has been unable to execute fully due to financial issues that the Company has faced. The strategic operating plan is based on the core competencies of the Company of extracting, processing and providing
minerals. The Company plans to expand its current markets and develop new markets for its limestone and limestone fillers, while maximizing the profitability of its sand, lime and marine businesses.



Potential Change to Long-Range Plan.    As a
result of the Companys financial restructuring, the Board of Directors includes only two Directors who were on the Board of Directors prior to the Effective Date of the Plan. Five of the Directors, who constitute a majority, were designated by
holders of Senior Subordinated Notes who were party to the commitment agreement and who received shares of convertible preferred stock, including one such Director who was designated by such holders of Senior Subordinated Notes who also became
holders of common stock. The Company may make changes, which could be material, to the business, operations and current long-range plan. It is impossible to predict what these changes will be and the impact they will have on the future results of
operations and the Companys share prices.



As previously
disclosed, management had been in discussions to sell the Companys mica operations.



Discussion of Post-Emergence Liquidity



Post-emergence credit facility.    On January 31, 2005, which was the Effective Date of the Plan for legal purposes, the Company and each of its wholly-owned direct and indirect subsidiaries
entered into the Companys post-emergence credit facility. The Company and several of its significant operating companies are borrowers under the post-emergence credit facility, and the remaining subsidiaries guarantee the obligations under the
post-emergence credit facility. The maturity date of the obligations under the post-emergence credit facility is January 30, 2010 or such earlier date as prescribed in the post-emergence credit facility. As of January 31, 2005, the Company had
outstanding indebtedness of $261 million under the post-emergence credit facility, comprised of revolving loans, a term loan A and a term loan B as described below.



36



---

Financial Condition(Continued)



The term loan A has an initial principal amount of $105 million. The term loan A bears interest at a
floating rate linked to the prime rate or LIBOR, at the Companys option. The term loan A, or such portion as the Company may elect, linked to LIBOR bears interest at the greater of 6.00% or LIBOR plus 4.00%, and such portion of the term loan A
as the Company may elect to be linked to the prime rate bears interest at the greater of 6.00% or the prime rate plus 1.50%. Principal payments are due in 47 consecutive monthly installments of $875,000, with the first payment due in January 2006,
and with a final installment of the remaining outstanding principal due on the maturity date of the post-emergence credit facility.



The term loan B has an initial principal amount of $150 million. The term loan B bears interest at a floating rate linked to the prime rate or LIBOR, at
the Companys option. The term B loan, or such portion as the Company may elect, linked to LIBOR bears interest at the greater of 12.25% or LIBOR plus 10.25%, and such portion of the term loan B as the Company may elect to be linked to the
prime rate, bears interest at the greater of 14.25% or the prime rate plus 9.75%. The outstanding principal of the term loan B is due on the maturity date of the post-emergence credit facility.



The revolving loans available under the post-emergence credit facility are in
an aggregate principal amount not to exceed $55 million (including a sublimit of $20 million for issuance of letter of credit accommodations), with an additional $10 million in revolving loans permitted, subject to availability requirements under
the post-emergence credit facility, from March through September 2005. Principal amounts of the revolving facility that the Company repays may be reborrowed in accordance with the terms of the post-emergence credit facility. The revolving loans
under the post-emergence credit facility bear interest at a floating rate linked to the prime rate or LIBOR, at the Companys option. Revolving loans linked to the prime rate bear interest at the greater of 5.50% or the prime rate plus 1.00%,
and revolving loans linked to LIBOR bear interest at the greater of 5.50% or LIBOR plus 3.50%. As of the Effective Date of the Plan, $5.725 million was outstanding under the revolving credit facility and $11.08 million in letter of credit
accommodations was outstanding.



The Company and its
subsidiaries are subject to affirmative and negative covenants under the post-emergence credit facility, including periodic financial reporting. The Company is also subject to financial covenants, including a minimum consolidated earnings before
interest, taxes, depreciation and amortization, which is known as EBITDA, and fixed charge coverage ratio tests measured for each period of four consecutive fiscal quarters and an annual covenant on capital expenditures.



For additional information on the post-emergence credit facility, you should
read the Financing Agreement filed as an exhibit to this Annual Report on Form 10-K.



Capital Stock.    As of the Effective Date of the Plan and pursuant to the Plan, 2,928,571 shares of common stock and 264,887 shares of restricted common stock were issued and outstanding.
As of the Effective Date of the Plan, and pursuant to the Plan, record holders of shares of old common stock with allowed interests under the Plan received warrants, exercisable until March 2, 2005, to purchase up to 576,256 shares of common stock
at an exercise price of $10 per share. Pursuant to the warrant offering, the Company issued 404,071 shares of common stock at $10 per share for a total purchase price of $4.041 million. The Companys Second Amended and Restated Articles of
Incorporation authorize it to issue shares of preferred stock, $0.01 par value per share, in one or more series, with such rights and restrictions and with such additional provisions as the Board of Directors may determine, including, among other
things, voting, dividend, redemption, sinking fund, liquidation and conversion rights, and additional restrictions. The convertible preferred stock constitutes a series of the preferred stock, and, as of the Effective Date of the Plan, 8,500,000
shares of convertible preferred stock were issued and outstanding. The annual dividend payable on the convertible preferred stock is paid at a rate of 14.8275%. The holders of the convertible preferred stock may convert such shares at any time into
shares of common stock. In addition, subject to certain conditions, the shares of convertible preferred stock are redeemable by the Company after twelve months at various prices. On March 22, 2005, these conditions were met.



37



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Financial Condition(Continued)



Sources and Uses of Funds.    The Companys principal sources of
funds in 2005 are expected to be operating revenues, cash and cash equivalents on hand and funds available for borrowing under the post-emergence credit facility. The Companys principal uses of funds are expected to be the payment of operating
expenses, interest expense and capital expenditures. The Company expects that operating revenues, cash and cash equivalents on hand, and the funds available for borrowing under the post-emergence credit facility will be sufficient to enable the
Company to cover its operating expenses, interest expense on indebtedness and capital expenditures. However, there can be no assurance that such funds will be sufficient to meet the Companys cash requirements on a consolidated basis. In
assessing the adequacy of the Companys capital resources, management has made estimates and projections of revenues and expenses which management believes to be reasonable. However, if the anticipated level of revenue is not achieved because
of decreased demand for the Companys products or weakness in the overall market for minerals and aggregates, or if expenses exceed the level the Company contemplates, the current sources of funds may be insufficient to meet the Companys
cash requirements in the future. Further, the Companys operations will be subject to the risks discussed in Risk FactorsRisks Related to the Companys Business. Should any of the potential adverse developments referred
to in those risk factors occur, available capital resources may prove insufficient. In the event that available capital resources are insufficient, the Company would need to take additional steps to increase revenues, curtail expenses, sell assets
or raise additional capital. There is no assurance that these approaches would be successful, and even if successful, these approaches could trigger other adverse effects on the Companys business or the operating results or financial
condition.



Discussion of Pre-Petition Liquidity



At December 31, 2004, the Company was party to the second
debtor-in-possession (second DIP) credit facility, a vessel term loan, a Senior Secured Notes agreement and a Senior Subordinated Note agreement.



Second DIP Credit Facility.    On April 30, 2004, the Bankruptcy Court entered an order authorizing the Company to enter into
the $305 million second DIP credit facility providing the Company with post-petition financing. The Bankruptcy Court also authorized the Company to pay certain commitment fees and other expenses related to this loan. The second DIP credit facility
was consummated on July 15, 2004. The second DIP credit facility was used to repay borrowings under the initial debtor-in-possession (initial DIP) credit facility and the pre-petition bank credit facility and provided a revolving credit
facility for working capital while the Company was in Chapter 11. During 2004, the Company incurred $11.053 million in deferred financing costs, which included the commitment fees and professional fees related to the second DIP credit facility. Upon
confirmation of the Companys Plan and emergence from Chapter 11 on January 31, 2005, the second DIP credit facility was automatically converted into the post-emergence credit facility described above.



The Companys second DIP credit facility repaid the borrowings under the
Syndicated Term Loan and the Senior Credit facility (pre-petition bank credit facility). The facility had a scheduled maturity of October 31, 2004 and had various financial covenants that the Company had violated. On September 11, 2003,
the Company entered into amendments with its syndicated banking group and Senior Secured Notes holders. The amendments required the Company to repay at least $100 million of debt from the proceeds of permitted asset sales by February 25, 2004. As a
result of the Companys decision to not repay $100 million in debt from proceeds of permitted asset sales by February 25, 2004, the Company was in default under the Syndicated Term Loan, Senior Credit Facility, Senior Secured Notes, Senior
Subordinated Notes and Vessel Term Loan.



The second DIP credit facility replaced the initial DIP credit facility that allowed the Company to borrow up to $70 million and was approved by the Bankruptcy Court on April 8, 2004. During 2004, the Company incurred $2.841 million in
deferred financing costs related to legal and professional fees related to the initial DIP credit facility.



Senior Secured Notes.    As previously discussed, the Company issued and sold $85 million in convertible preferred stock
pursuant to the rights offering and commitment agreement. The Company used the net proceeds



38



---

Financial Condition(Continued)



from the issuance and sale of the convertible preferred stock and available cash and borrowings under the post-emergence credit facility to redeem the Senior
Secured Notes at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance with the terms of the Senior Secured Notes purchase agreement. The Senior Secured Notes were funded on October 25, 2002 with a scheduled
amortization in 2007 and 2008. Interest on the notes included a 13% per annum cash payment, payable quarterly and a 6% payment-in-kind. This interest payment was suspended during the bankruptcy; however, it was paid upon emergence on January 31,
2005. The Company had violated financial covenants with this agreement in 2003.



Senior Subordinated Notes.    As previously discussed, the Plan included the conversion of a $100 million principal amount of Senior Subordinated Notes plus accrued and unpaid interest into
a pro-rata distribution of 2,928,571 shares of common stock in full satisfaction of the claims of the Senior Subordinated Notes holders.



The Company was in default under its Senior Subordinated Notes agreement in September 2003 for deferring an interest payment in excess of its 30-day grace
period. That default was cured in September 2003.



Vessel
Term Loan.    The Vessel Term Loan contains covenants that match the post-emergence credit facility. Semi-annual principal payments from January 15, 2005 through January 15, 2007 range from $920,000 to $1.055 million,
increasing yearly. A final principal payment of $7.650 million is due on July 15, 2007.



The Companys operating activities provided cash of $39.819 million in 2004, used cash of $7,000 in 2003 and provided cash of $18.537 million in 2002. In 2004, the Company paid $14.75 million for reorganization
items. The significant increase in cash provided by operating activities between 2004 and 2003 was primarily due to the effects of improved operating income and the bankruptcy-imposed stay on the payment of pre-petition liabilities, the result of
which caused significant increases in the accrued expenses, interest and accounts payable balances from 2003 to 2004 and increased the cash provided by operations. These activities were partially offset by an increase in inventory and accounts
receivable. The increase between 2004 and 2002 was primarily the result of increased liabilities due to the bankruptcy-imposed stay on payment of those liabilities, partially offset by a higher net loss in 2004 and tax refunds of $7.855 million in
2002.



Expenditures for property and equipment totaled $23.899
million in 2004 compared to $19.165 million and $20.016 million in 2003 and 2002, respectively. The increase in capital expenditures between 2004 and 2003 was primarily the result of strict cost controlling measures intended to conserve capital in
2003. Expenditures for the sustaining of existing property and equipment were $16.451 million in 2004. Expansion projects amounted to $4.567 million, with the remaining $2.881 million for quarry development. Expenditures for property and equipment
for 2005 are currently expected to approximate $20 million and will be funded with current operating revenues and monies available under the post-emergence credit facility. Management expects that the proportion of 2005 capital expenditures for
expansion projects and replacement will be changed slightly from 2004 levels. As part of the Companys accounting policy changes in Fresh-Start reporting, the Company will no longer capitalize quarry development costs. The Company anticipates
using a higher percentage of capital expenditures toward expansion assets in 2005. The anticipated increase is primarily because of a scheduled expansion project at the Performance Minerals segments Brady, Texas, operating location. The
Company has no material commitments for capital projects in 2005 or beyond.



In 2004, the Company incurred $13.894 million of deferred financing costs related to the acquisition of the initial DIP credit facility and second DIP credit facility. In 2003, the Company incurred $4.762 million in
deferred financing costs related to the amendment of the pre-petition credit facility and Senior Secured Notes agreement. In 2002, the Company incurred $8.413 million of deferred financing costs related to the execution of the Senior Secured Notes
agreement and amendment of the pre-petition credit facility.



In 2004, the Companys additional borrowings exceeded debt repayments by $26.248 million, while in 2003 and 2002, the Companys additional borrowings exceeded debt repayments by $22.044 million and



39



---

Financial Condition(Continued)



$6.576 million, respectively. In all three years, additional borrowings were primarily used to fund capital expenditures and financing costs. In 2004,
additional borrowings were reduced by the sale of the Redi-Mix business and the vessel M/V Richard Reiss. Furthermore, additional borrowings were used in 2003 to fund the Erie Sand and Gravel acquisition and were reduced from the sale of the Lawn
and Garden business unit.



Prior to their amendment in
September 2003, the Companys pre-petition credit facility required interest rate protection on fifty-percent of the Companys senior secured debt. Accordingly, the Company entered into interest rate swap agreements in 2000 to limit the
effect of increases in the interest rates on variable rate debt. The differential between fixed and variable rates is recorded as an increase or decrease to interest expense. At December 31, 2004, the Company had no such interest rate swaps
remaining as the final swap expired on June 30, 2004.



As a
result of falling LIBOR-based interest rates, interest expense increased $1.274 million, $7.446 million and $9.967 million in 2004, 2003 and 2002, respectively, because of these interest rate swaps. See Note G to the consolidated financial
statements for a further description of the Companys swap agreements.



Qualitative and Quantitative Disclosures About Market Risk.    The following tables provide information about the Companys derivative and other financial instruments that are sensitive
to changes in interest rates, which include interest rate swaps and debt obligations. For debt obligations, the table presents cash flows and related weighted average interest rates by the original contracted maturity dates. For interest rate swaps,
the table presents notional amounts and weighted average LIBOR interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are
based on implied forward LIBOR rates in the yield curve. For 2004, the second DIP term A loan is LIBOR plus 4.00% and the second DIP term B loan is LIBOR plus 9.75%. The weighted average rate is LIBOR plus a 6.00% margin at December 31, 2003 for
variable rate long-term debt. The Company does not hold or issue financial instruments for speculative purposes.



|                           |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|-------------------------- |  | ----------------- | ------- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------ | - | ---------- | - | ------ | ----- |  | ---------- | ------- | - |  | - | ------- |  | - | -------
|                           |  | December 31, 2004
|                           |  | 2005              |         |   | 2006 |   |       | 2007 |  |   | 2008  |   |  | 2009 |        |   | Thereafter |   |        | Total |  | Fair Value
|                           |  | (In thousands)   
|Liabilities:               |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Long-term debt:            |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Fixed rate                 |  | $                 | 92,166  |   |      | $ | 2,128 |      |  | $ | 8,796 |   |  | $    | 103    |   |            |   |        |       |  |            |         |   |  | $ | 103,193 |  | $ | 103,193
|Average interest rate      |  |                   | 12.56   | % |      |   | 9.72  | %    |  |   | 9.76  | % |  |      | 7.00   | % |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Variable rate              |  | $                 | 250,000 |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  | $ | 250,000 |  | $ | 250,000
|Average interest rate      |  |                   | 9.34    | % |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|                           |  | December 31, 2003
|                           |  | 2004              |         |   | 2005 |   |       | 2006 |  |   | 2007  |   |  | 2008 |        |   | Thereafter |   |        | Total |  | FairValue 
|                           |  | (In thousands)   
|Liabilities:               |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Long-term debt:            |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Fixed rate                 |  | $                 | 2,226   |   |      | $ | 2,093 |      |  | $ | 2,125 |   |  | $    | 51,076 |   |            | $ | 37,510 |       |  | $          | 100,000 |   |  | $ | 195,030 |  | $ | 134,889
|Average interest rate      |  |                   | 13.43   | % |      |   | 13.51 | %    |  |   | 13.58 | % |  |      | 13.66  | % |            |   | 12.45  | %     |  |            | 10.00   | % |  |   |         |  |   |        
|Variable rate              |  | $                 | 225,808 |   |      | $ | 334   |      |  | $ | 334   |   |  | $    | 334    |   |            |   |        |       |  |            |         |   |  | $ | 226,810 |  | $ | 226,810
|Average interest rate      |  |                   | 7.46    | % |      |   | 2.99  | %    |  |   | 4.18  | % |  |      | 4.96   | % |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|                           |  |                   |         |   |      |   |       |     
|Interest rate derivatives: |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Interest rate swaps:       |  |                   |         |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Variable to fixed          |  | $                 | 50,000  |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  | $ | 50,000  |  | $ | 1,457  
|Average LIBOR pay rate     |  |                   | 6.97    | % |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        
|Average LIBOR receive rate |  |                   | 1.46    | % |      |   |       |      |  |   |       |   |  |      |        |   |            |   |        |       |  |            |         |   |  |   |         |  |   |        



The Company did not
declare a cash dividend during 2004, 2003, and 2002 as the Companys current and prior lending facilities prohibit cash dividends.



40



---

Financial Condition(Continued)



At December 31, 2004, the Company re-evaluated assumptions used in determining postretirement pension
and health care benefits. The weighted-average discount rate was adjusted from 6.50% to 6.00% to better reflect expected market rates. Additionally, the annual rate of increase in the per capita cost of covered health care benefits was revised to
9.00% at December 31, 2004, decreasing gradually to 5.00% in 2009 and will remain at that level thereafter from 10.00% (pre-65) and 6.00% (post-65), with the pre-65 rate decreasing gradually to 5%, in 2009 and the post-65 rate in 2006. These changes
resulted in an increase in the benefit obligation of $6.811 million for the pension plans and $4.279 million for the postretirement health care plan. Though these changes will increase the Companys pension and postretirement expense in 2005,
the impact is not expected to be material. The fair value of the Companys pension plan assets grew $4.476 million during 2003, and that increase is estimated to result in a $678,000 reduction in pension expense in 2005. All of the
Companys pension and postretirement benefit liabilities were reinstated following the Effective Date of the Plan. Prior to the Effective Date of the Plan, some of the pension plans held shares of old common stock. That old common stock was
sold prior to the Effective Date of the Plan and, as such, the plans did not receive warrants to purchase common stock.



In accordance with Fresh-Start reporting, the assets and liabilities of the Companys defined benefit plan are to be recorded at their fair value,
which represents the net amount of the fair market value of pension assets compared with the projected benefit obligation. The adjustment to fair value resulted in a $43.132 million charge to reorganization items, net and the reduction of the
historical prepaid pension cost asset by $31.454 million, an increase of $3.755 million in other long-term liabilities related to the accrual for pension liabilities, a net reduction of $5.510 million in accumulated other comprehensive loss related
to the historical minimum pension liability and a $2.412 million increase in the deferred tax liability relating to the tax effects of the accumulated other comprehensive loss. This adjustment to fair value eliminates the future amortization of
unrecognized net actuarial loss and unrecognized prior service costs and is estimated to reduce pension expense in 2005 by $2.977 million.



In accordance with Fresh-Start reporting, the liability for other postretirement benefits should be adjusted to fair value, which is the accumulated
postretirement benefit obligation in excess of the fair value of the plan assets. Based upon the December 31, 2004 accumulated postretirement benefit obligations in excess of the fair value of plan assets, the Company recorded an increase of $8.589
million in the postretirement benefit obligation on the consolidated balance sheet. This adjustment to fair value eliminates the future amortization of unrecognized net actuarial loss and unrecognized prior service costs and is estimated to reduce
expense in 2005 by $1.075 million.



At December 31, 2003, the
Company re-evaluated assumptions used in determining postretirement pension and health care benefits. The weighted-average discount rate was adjusted from 7.00% to 6.50% to better reflect 2003 and long-term market rates. Additionally, the annual
rate of increase in the per capita cost of covered health care benefits was revised to 10.00% (pre-65) and 6.00% (post-65), decreasing gradually to 5.00% (the pre-65 rate in 2009 and the post-65 rate in 2006) at December 31, 2003 from 8.25% (pre-65)
and 6.00% (post-65), with the pre-65 rate decreasing gradually to 6% in 2006 and the post-65 rate remaining constant at December 31, 2002. These changes resulted in an increase in the benefit obligation of $3.994 million for the pension plans and
$6.819 million ($1.199 million related to the revision of the per capita cost of covered health care benefits) for the postretirement health care plan. Though these changes increased the pension and postretirement expense in 2004, the impact was not
material. The fair value of the pension plan assets increased $12.139 million during 2003, and that increase resulted in an $886,000 reduction in pension expense in 2004.



At December 31, 2002, the Company re-evaluated assumptions used in determining postretirement pension and health care
benefits. The weighted-average discount rate was adjusted from 7.25% to 7.00% to better reflect market rates. The decrease resulted in an increase in the projected benefit obligation of $2.230 million for the pension plans and $1.580 million for the
postretirement health care plan. The fair value of the Companys pension plan assets declined $18.564 million during 2002, and that decline resulted in approximately $1.910 million in additional pension expense in 2003.



41



---

Financial Condition(Continued)



The Companys Second Amended and Restated Articles of Incorporation authorize the Company to
issue 90,000,000 shares of common stock. As of March 3, 2005, 3,597,479 shares of common stock (including 264,837 of restricted shares issued under the management stock plan and 404,071 shares issued upon the exercise of warrants) were issued and
outstanding, 2,928,571 of which were issued pursuant to the Plan. The Companys Second Amended and Restated Articles of Incorporation also authorize the Company to issue 30,000,000 shares of preferred stock, $0.01 par value per share, in one or
more series, with such rights and restrictions and with such additional provisions as the Board of Directors may determine, including, among other things, voting, dividend, redemption, sinking fund, liquidation and conversion rights, and additional
restrictions. The convertible preferred stock constitutes a series of the preferred stock, and as of January 31, 2005, 8,500,000 shares of convertible preferred stock were issued and outstanding.



Subject to the terms of the convertible preferred stock, the Board of
Directors has broad discretion with respect to the creation and issuance of preferred stock without shareholder approval. The rights, preferences and privileges of holders of the common stock may be adversely affected by the holders of shares of any
other series of preferred stock that the Company may designate and issue from time to time. Among other things, by authorizing the issuance of other shares of preferred stock with particular conversion, redemption, voting or other rights, the Board
of Directors could adversely affect the voting power of the holders of the common stock and could discourage any attempt to effect a change in control of the Company even if such a transaction would be beneficial to the interests of the
shareholders.



MLO Contingent
Agreement.    The purchase price of the Companys Michigan Limestone operation, which was acquired by the Company in the second quarter of 2000, includes contingent payments subject to achieving certain operating
performance parameters through 2011. The Company accrued a contingent payment of $0, $2.1 million and $3.072 million at December 31, 2004, 2003 and 2002, respectively, representing additional purchase price and an increase to recorded mineral
reserves. As a result of bankruptcy negotiations and application of Fresh-Start reporting, the character of this agreement changed. After the bankruptcy petition date, the official unsecured creditors committee (a statutory committee
established to represent the interests of the Companys unsecured creditors (the creditors committee)) entered into negotiations with certain of the holders of the MLO claims regarding possibly amending the interest purchase
agreement. As a result of these negotiations, the interest purchase agreement was amended as of January 31, 2005, which was the Effective Date of the Plan, and as of January 31, 2005 was assumed (as amended) by the Company. Specifically, pursuant to
the amended interest purchase agreement, the parties agreed to reduce significantly the aggregate annual amount of contingent payments and to extend the time period within which the contingent payments are to be made by four to six years. The
amended interest purchase agreement provides for maximum aggregate amounts of annual contingent payments in the period 2003 through 2016 as follows:



| |  |  | $625,000 for 2003 (which was paid on January 31, 2005);
| | - |  | -------------------------------------------------------



| |  |  | $1.025 million for the period 2004-2006; and
| | - |  | --------------------------------------------



| |  |  | $2.65 million for the period 2007-2016.
| | - |  | ---------------------------------------



With this new agreement and Fresh-Start reporting, the Company is now applying contingent liability accounting (SFAS No. 5 Accounting for
Contingencies) to this liability. Based upon the Companys historical experience on tonnage shipments and other estimates, it is estimating that the new liability related to the purchase agreement with former owners of Michigan
Limestone is $16.285 million, with $1.5 million classified in other accrued expenses and $14.785 million classified in other long-term liabilities on the consolidated balance sheet. This change will increase the accrual by $14.185 million and is
expensed as reorganization items, net. See Item 13. Certain Relationships and Related Transactions, for further discussion of MLO contingent payments.



Mr. Lundin received payments totaling $568,000 in 2001, $571,000 in 2002 and $391,000 in 2003 as his 18.6% share of the
contingent payments. Mr. Lundin did not receive any contingent payment in 2004 but



42



---

Financial Condition(Continued)



received a payment of $112,525 on the Effective Date of the Plan. On November 1, 2001, Mr. Lundin was promoted to the position of the Companys
President and Chief Operating Officer, and on December 12, 2001, Mr. Lundin was elected to the Companys Board of Directors. On December 4, 2002, Mr. Lundin was appointed as the Companys Chief Executive Officer. Mr. Lundin was not an
executive officer of the Company prior to the Michigan Limestone acquisition.



Contingencies.    The Company and certain of its subsidiaries are involved in a limited number of claims and routine litigation incidental to operating the Companys current business.
In each case, the Company is actively defending or prosecuting the claims. Many of the claims are covered by insurance and none are expected to have a material adverse effect on the Companys financial condition.



Several of the Companys subsidiaries have been and continue to be named
as defendants in a large number of cases relating to the exposure of people to asbestos and silica. The plaintiffs in the cases generally seek compensatory and punitive damages of unspecified sums based upon the Jones Act, common law or statutory
product liability claims. Some of these cases have been brought by plaintiffs against the Company (or the Companys subsidiaries) and other marine services companies or product manufacturer co-defendants. Considering the Companys past and
present operations relating to the use of asbestos and silica, it is possible that additional claims may be made against the Company and the Companys subsidiaries based upon similar or different legal theories seeking similar or different
types of damages and relief. Management is unable to estimate the Companys potential exposure to unasserted claims. In the fourth quarter of 2004, the Company entered into a settlement agreement between one of its subsidiaries, ON Marine
Services Company and certain tort plaintiffs to settle at least 750 of these claims for $1.5 million utilizing certain insurance funds. Company funds will not be used to pay this settlement. The settlement was subject to the Bankruptcy Courts
approval and confirmation of the Companys Plan. An order approving the settlement and confirming the Plan was entered by the Bankruptcy Court on November 17, 2004.



Management believes that both the asbestos and silica product liability claims are covered by multiple layers of insurance
policies from multiple sources and an insurance trust. In particular on December 31, 2004, prior to the settlement discussed above and below, the Company had approximately $294 million of insurance coverage available with respect to any asbestos
liability claims, broken down as follows: (1) about $63.2 million in cash in a trust on account of confidential settlement agreements between the Company and one of the Companys insurers, and (2) about $230.8 million on account of insurance
policies. In addition, the Company had over $800 million of insurance coverage available with respect to any silica liabilities. After consultation with outside advisors, management believes that the insurers have no legitimate defenses to coverage
under these policies. Management further believes that the Company should be able to recover the full limits of the policies issued by solvent carriers.



At December 31, 2004, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims of about 73,000 claimants. In the fourth
quarter of 2004, the Company entered into settlement agreements between the Companys affiliate ON Marine Services Company and certain tort plaintiffs, which were approved by the Bankruptcy Court. The settlements with these tort plaintiffs
resolve about 20,000 of the claims asserted against certain of the Companys affiliates as of December 31, 2004. Management estimates that the settlement payments under the settlement agreements for approximately 17,800 of these claims will
aggregate about $53.204 million and will be paid from the insurance trust established pursuant to the Settlement Trust Agreement, made and entered into on August 28, 2003, by and among the Companys subsidiary ON Marine Services Company,
underwriters at Lloyds and London Market Company Signatories and Wells Fargo Bank Minnesota, N.A. The remaining 2,200 settled claims will be paid upon the approval of the insurers paying the claims, and the total amount of settlement payments
under the settlement agreements relating to these asbestos claims cannot be determined until medical and exposure evidence is provided by such claimants. Management anticipates that any settlement payments made on account of such claims will be paid
under both the insurance



43



---

Financial Condition(Continued)



trust and other of the Companys insurance policies. At March 15, 2005, 11,180 filed and un-filed pending claims have been submitted and approved for
payment in accordance with the terms of the settlement agreements. The total settlement amount for these 11,180 claims is $34.367 million. Separate from the settlements, approximately 4,100 claims were dismissed in Mississippi for lack of in
personam jurisdiction. The Company received some new claims during bankruptcy even with the automatic stay on litigation, and has experienced an increase in filings since emergence. Due to the quantity of dismissals, settlements and new filings, an
accurate pending claim count is not possible at this time. Total pending claims will be adjusted and reported quarterly after account for the dismissals, settlements and new filings.



Management believes that the remaining currently outstanding claims can be satisfied or otherwise resolved within the limits
of the Companys remaining available insurance. Management cannot predict whether or not the Companys available insurance will be adequate to cover any and all asbestos claims that arise in the future or that the Company will have the
ability to otherwise successfully defend or resolve such cases. If there are no developments that reduce the impact of asbestos litigation or its costs, the Companys available insurance may be insufficient to cover all future claims, and there
could be a material adverse effect on the Companys results of operations, liquidity and financial condition. The severity of this risk cannot be measured, and is highly dependent on the rate of future claims, the cost to defend, settle, or
otherwise resolve claims, the length of time to resolve claims and the impact of future legislative or other developments in the asbestos litigation arena.



The Companys ability to fund asbestos settlements or judgments will be subject to the availability of its remaining insurance coverage and to funds
from operations, asset sales or capital-raising transactions. Excluding the impact of the most recent settlements, the Company has about $294 million of insurance resources available to address both current and future asbestos liabilities. The
Company has had an average of 13,750 asbestos claims asserted against it each year for the past five years. The average cost per claim for settlement or other resolution for the past five years prior to the most recent settlements was about $1,000;
the average cost per claim of the most recent settlements was about $3,000. The length of time to resolve claims varies on a case-by-case basis and can be affected by decisions of management and opposing counsel. If there are no developments that
reduce the impact of asbestos litigation or its costs to the Company, its available insurance may be insufficient to cover all future claims, and there could be a material adverse effect on the Companys results of operations, liquidity and
financial condition.



With respect to silica claims, at
December 31, 2004, the Company was a co-defendant in cases involving about 23,000 claimants. The Company has been and will continue to be responsible for funding a small percentage of all silica settlements and defense costs. The Company continues
to have insurance coverage; however, certain policies have retroactive premiums that will come due if claims accrue to those policies. The premiums are based upon actual and incurred losses and cannot be calculated until losses are incurred. The
likelihood of liability for the Company arising out of these claims is probable.



The exposure of persons to silica and the accompanying health risks have been and continue to be significant issues confronting the industrial minerals industry in general, and specifically the Companys
Performance Minerals segment. Proposed changes to standards for exposure to silica are under review by the United States Occupational Safety and Health Administration. This review could result in more stringent worker safety standards or, in the
alternative, requirements for additional action on the part of silica users regarding lower permissible exposure limits for silica. More stringent worker safety standards or additional action requirements, including the costs associated with these
revised standards or additional action requirements, and actual or perceived concerns regarding the threat of liability, or health risks, including silicosis, associated with silica use, may affect the buying decisions of the users of the
Companys silica products. If worker safety standards are made more stringent, if the Company is required to take additional action regarding lower permissible exposure limits for silica, or if the Companys customers decide to reduce
their use of silica products based on actual or perceived health risks or liability concerns, the Companys operating results, liquidity and



44



---

Financial Condition(Continued)



capital resources could be materially adversely affected. The extent of any material adverse effect would depend on the nature and extent of the changes to
the exposure standards, the cost of meeting and the Companys ability to meet more stringent standards, the extent of any reduction in the Companys customers use of the Companys silica products and other factors that cannot be
estimated at this time.



On or about December 23, 2004, certain
current and former members of the Companys Board of Directors were named as defendants in a complaint filed by a former shareholder. Although the Company was not named in the complaint, it has agreed to indemnify the directors pursuant to Ohio
law, the Companys First Amended and Restated Articles of Incorporation, and certain indemnification agreements the Company entered into with the named Directors. The Company maintains Director and officer liability insurance, which has a
deductible of $750,000. Although the outcome of the suit is not determinable at this time, management does not anticipate expending funds in excess of the deductible for indemnity or defense.



On January 31, 2005, the Senior Secured Notes were redeemed at 106% of par
value immediately after their reinstatement pursuant to the Plan in accordance with the terms of the Senior Secured Notes purchase agreement; however, certain Senior Secured Notes holders have filed a lawsuit claiming entitlement to default interest
and penalties from the former Senior Subordinated Notes holders, based upon an argument that the Senior Subordinated Notes holders claims in bankruptcy were subordinate to the claims of the Senior Secured Notes holders. The Bankruptcy Court
ruled in favor of the Company and Senior Subordinated Notes holders and the certain Senior Secured Notes holders have appealed. If the Senior Secured Notes holders succeed in their appeal, it is possible that the positions of those common
shareholders who exchanged their Senior Subordinated Notes for common stock could be diluted.



Litigation is inherently unpredictable and subject to many uncertainties. Adverse court rulings, determinations of liability or retroactive or prospective changes in the law could affect claims made against the
Company and encourage or increase the number and nature of future claims and proceedings. Together with reserves recorded and available insurance, pending litigation is not expected to have a material adverse effect on the Companys operations,
liquidity or financial condition.



Off-Balance Sheet Arrangements



The Company has stand-by letters of credit totaling $12.1
million at December 31, 2004, with no balance outstanding as of December 31, 2004. These stand-by letters of credit, in amounts ranging from about $4,400 to $3 million, have been issued by Wells Fargo Bank, N.A. for a variety of possible uses,
including for costs relating to workers compensation, insurance, corporate office rent, electricity, rail freight, a bonding program and above-ground storage tank removal. The stand-by letters of credit issued by Wells Fargo mature on June 25,
2005. The Company does not consider these stand-by letters of credit to be material to its business or operations, including its liquidity and capital resources, and the Company has not incurred any additional indebtedness in connection with these
stand-by letters of credit.



Contractual Obligations



|                                |  |                        |         |                        |   |                         |  |                         |        |                                    |   |       |  |   |       
|------------------------------- |  | ---------------------- | ------- | ---------------------- | - | ----------------------- |  | ----------------------- | ------ | ---------------------------------- | - | ----- |  | - | ------
|(In Thousands)                  |  | Payments due by period
|Contractual Obligations (1)     |  | Total                  |         | Less than1 year (2005) |   | 1  3 years (2006-2007) |  | 3  5 years (2008-2009) |        | More than 5 years (2010 andbeyond)
|Long-term Debt (2)              |  | $                      | 353,193 |                        | $ | 342,166                 |  | $                       | 10,924 |                                    | $ | 103   |  |   |       
|Operating Leases                |  |                        | 31,758  |                        |   | 6,987                   |  |                         | 9,968  |                                    |   | 4,277 |  | $ | 10,526
|Purchase Obligations            |  |                        | 5,709   |                        |   | 4,259                   |  |                         | 1,450  |                                    |   |       |  |   |       
|Other Long-term Liabilities (3) |  |                        | 5,433   |                        |   | 2,607                   |  |                         | 586    |                                    |   | 308   |  |   | 1,932 
|Total                           |  | $                      | 396,093 |                        | $ | 356,019                 |  | $                       | 22,928 |                                    | $ | 4,688 |  | $ | 12,458



45



---

Financial Condition(Continued)



---

|(1) |  | Management has not included estimated future payments for pension, postretirement benefit obligations and the Coal Act in the above schedule because that funding is subject to
changing legislation and significant Company assumptions. In 2005, the Company expects to contribute $2.5 million for pensions, $3.1 million for postretirement benefit obligations and $1.038 million for the Coal Act.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The Companys $250 million second DIP was converted to a post-emergence credit facility with principal maturities of $10.5 million per year starting in 2006 extending through
2010 when the entire facility is due.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes an insurance settlement and other supplemental benefits.
|--- |  | -----------------------------------------------------------------



Acquisitions and Dispositions



In separate transactions during January 2004, the Company sold two assets of its Erie Sand and Gravel operations (the Redi-Mix business unit and the
vessel M/V Richard Reiss) to E.E. Austin & Son, Inc. and Grand River Navigation Company, Inc., respectively. The Redi-Mix business unit was comprised of Serv-All Concrete, Inc. and S&J Trucking, Inc. These assets were not considered integral
to the long-term strategic direction of the Company. Proceeds from the sales were $1.225 million for Redi-Mix and $1.8 million for the vessel. No gain or loss on sale was recognized by the Company.



In conjunction with the sale of the Redi-Mix business unit, the Company
entered into a long-term supply agreement with E.E. Austin & Son, Inc., dated January 21, 2004, pursuant to which the Company will provide certain aggregates at market prices to E.E. Austin & Son, Inc. for an initial term of fifteen years
beginning on the closing date of the agreement. Additionally, the Company and E.E. Austin & Son, Inc. entered into a sublease agreement, dated January 21, 2004, whereby E.E. Austin & Son, Inc. is subleasing property from the Company
previously dedicated to the operation of the Redi-Mix business unit. The initial term of the sublease agreement commenced in January 2004 and extends to December 31, 2019. The agreement is renewable in five-year increments thereafter, upon agreement
by both parties.



On October 27, 2003, as part of its ongoing
business restructuring, the Company sold the Lawn and Garden business unit of its Global Stone operating segment to Oldcastle Retail, Inc. (Oldcastle). The sales price was $10 million of value subject to working capital adjustments.
Based upon those working capital adjustments, the Company received $6.871 million in cash at closing. The net book value of the Lawn and Garden business unit at the closing date, including an allocation of the Global Stone segments goodwill of
$3.316 million, was $10.057 million. The Company recognized a loss on sale of assets of $3.692 million during the fourth quarter of 2003. During 2004, the Company recovered additional amounts on the accounts receivable balance resulting in an
adjustment to the loss and recognition of $29,000 of gain.



In
conjunction with the sale of the Lawn and Garden business unit, the Company entered into a long-term supply agreement with Oldcastle, dated October 27, 2003, pursuant to which the Company will provide certain raw materials at market price to
Oldcastle for an initial term of ten years beginning on the closing date of the agreement, with a renewal option for an additional ten-year period.



The Company and Oldcastle also entered into a lease and operation of equipment agreement, dated October 27, 2003, whereby certain areas of the
Companys York, Pennsylvania, operations previously dedicated to Lawn and Garden operations are being leased at market rates to Oldcastle through December 31, 2005.



In early January 2003, the Company acquired all of the outstanding common shares and other ownership interests in a group of
companies together known as Erie Sand and Gravel Company (Erie Sand and Gravel) for $6.831 million in cash and $4.069 million in assumed debt, which was refinanced at closing. The acquisition included fixed assets of $5.446 million and goodwill of
$4.149 million. Erie Sand and Gravel operates a dock, a bulk products terminal, a Great Lakes self-unloading vessel, a sand dredging and processing operation, a ready-



46



---

Financial Condition(Continued)



mix concrete mixing facility and a trucking company that distributes construction sand and aggregates in the northwest Pennsylvania/western New York region.
The net assets and results of operations of Erie Sand and Gravel are included within the Companys Great Lakes Minerals segment.



The Erie Sand and Gravel acquisition was accounted for under the purchase method of accounting. The purchase price has been allocated based on estimated
fair values at the date of acquisition.



In addition to the
sale of the Redi-Mix business and the M/V Richard Reiss in 2004, the Company received proceeds of $8,000 and recorded pre-tax losses of $36,000 from other miscellaneous asset sales. In 2003, the Company received proceeds of $387,000 and recorded
pre-tax gains of $6,000 from miscellaneous asset sales other than the sale of the Lawn and Garden business unit. In 2002, the Company received proceeds of $2.304 million from the sale of non-strategic mineral processing operations in the Performance
Minerals segment and other miscellaneous asset sales. In connection with the sale of non-strategic mineral processing operations, $959,000 of proceeds received in excess of the net book value of the underlying assets was recorded within the
provision for restructuring, asset impairments and early retirement programs on the consolidated statement of operations. Additionally, the Company recorded pre-tax gains of $55,000 in 2002 related to other miscellaneous asset sales.



As previously disclosed, management had been in discussions to
sell the Companys mica operations (Kings Mountain and Velarde operations). Due to the bankruptcy proceedings, the Company was not authorized to sell any assets. Upon emergence from bankruptcy and the installation of a new Board of Directors,
plans to sell the mica operations have resumed. On March 10, 2005, subsequent to the December 31, 2004 fiscal year-end but before the issuance of the 2004 year-end financial statements, the Board of Directors provided authorization for the sale of
the mica operations. At that time, the Company determined that the plan of sale criteria in FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, had been met. Due to the timing of when the
Company satisfied the criteria for the mica operations to be considered held for sale, the mica operations are considered as held and used in the December 31, 2004 financial statements. The carrying amount of the mica
operations is approximately $15 million. The Company believes that the Kings Mountain operation will be sold prior to the end of the second quarter of fiscal year 2005. The Company believes that the Velarde operation will be sold prior to the end of
fiscal year 2005.



47



---

Results of Operations



See the discussion above regarding the Companys emergence from bankruptcy on January 31, 2005.



The Companys net sales and operating revenues were $435.650 million,
$404.229 million and $400.572 million in 2004, 2003 and 2002, respectively. Operating income in 2004 was $19.749 million compared with operating loss of $6.647 million in 2003 and operating income of $34.625 million in 2002. The 2004 operating
income includes a pre-tax impairment charge of $5.694 million to reduce the net book value of the Performance Minerals segments Velarde plant due to the temporary suspension in operations. The 2004 operating income also includes a $1.315
million impairment charge related to the exit and sublease of the Cleveland Marine Services office. The 2003 operating loss includes a $13.114 million pre-tax asset impairment charge to reduce the net book value of the Performance Minerals
segments Specialty Minerals operation to its estimated fair value. The Company reported a net loss in 2004 of $106.075 million compared to a net loss of $33.192 million in 2003 and a net loss of $6.608 million in 2002. The 2004 net loss
includes $78.192 million in reorganization expense. In addition to the impairment charge discussed above, 2003 net loss includes an after-tax charge of $1.391 million for the cumulative effect of accounting change for asset retirement obligations
under SFAS No. 143, Accounting for Asset Retirement Obligations, (SFAS No. 143) which the Company adopted at January 1, 2003.



Net Sales and Operating Revenues.    The $31.421 million (8%) increase in net sales and operating revenues in 2004 compared
with 2003 was primarily attributed to (1) an increase in demand for metallurgical and aggregate limestone due to general economic improvement, the recovery of the U.S. integrated steel industry and an increase in pricing power for lime in the
Companys Global Stone segment; (2) increased vessel revenues, which were the result of higher market demand including the sailing of additional vessels, higher water levels and higher fuel costs increasing fuel pass-throughs; and (3) increased
demand for frac sand from oil and gas service companies from the Companys Performance Minerals segment and increased market share. These increases to net sales and operating revenues were partially offset by decreased revenues from the sale of
the Lawn and Garden business unit of its Global Stone segment in the fourth quarter of 2003 and the sale of the Great Lakes Minerals segments S&J and Serv-All operations in the first quarter of 2004.



Net sales and operating revenues in 2004 increased $35.078 million or 9% in
comparison to 2002 due to the increased demand for frac sand from oil and gas service companies from the Companys Performance Minerals segment and increased market share, the Erie Sand and Gravel acquisition in 2003, an increase in lime demand
and pricing and an increase in aggregate demand.



Operating
Income (Loss).    The operating income for year ended December 31, 2004 was $19.749 million compared with an operating loss in 2003 of $6.647 million. The operating loss in 2003 includes a pre-tax asset impairment charge of
$13.114 million related to the write-down of the Performance Minerals segments Specialty Minerals operation to fair value. During the third quarter of 2004, the Company recorded an additional $5.695 million pre-tax asset impairment charge to
further reduce the net book value of the Performance Minerals segments Specialty Minerals operations Velarde plant. The impairment indicator was a temporary suspension of operations at the Velarde plant. In the first quarter of 2004, the
Company recorded a $1.315 million impairment charge related to the exit and sublease of the Cleveland Marine Services office. In the second quarter of 2004, the Company recorded $500,000 for exit costs related to previously shutdown abrasives
facilities. Management believes that excluding the impairment and restructuring charges provides a better comparison of year-to-year operating results. Excluding the impairment and restructuring charges, the Company had operating income of $27.195
million and $6.574 million for 2004 and 2003, respectively, a $20.621 million increase for 2004 over 2003. The Company has benefited from (1) increased revenues and the effect of higher volumes on gross margins of the Great Lakes Minerals
segments limestone quarries and vessels; (2) increased revenues and its impact to operating income from increased frac revenues in the Performance Minerals segment; (3) increased revenues and its impact to operating income from increased
aggregate and lime revenues in the Global Stone segment; (4) lower impairment charges in 2004 compared with 2003; (5) lower provisions for doubtful accounts; and (6) lower selling, general and administrative expenses primarily because of on-going
cost cutting activities



48



---

Results of Operations(Conditions)



and $4.4 million of legal and professional fees related to the Companys restructuring in 2003s operating income. These increases have been offset
slightly by higher energy costs and higher salaried bonus awards in 2004.



Operating income decreased $14.8 million between 2002 and 2004 primarily due to $7.446 million in adjustments for impairments and restructuring liabilities, an increase in cost of goods sold as a percentage of sales,
higher depreciation from stripping amortization and FAS No. 143 and higher retiree healthcare expense.



Net Loss.    Net loss for 2004 was $106.075 million as compared with a net loss of $33.192 million in 2003. The net losses in
2004 and 2003 include the impairment and restructuring charges identified above. The net loss for 2003 includes a $3.692 million pre-tax loss on sale of the Global Stone segments Lawn and Garden business unit (partially offset by a decrease in
other expense) and an after-tax charge of $1.391 million for the cumulative effect of accounting change for asset retirement obligations under SFAS No. 143. The higher loss in 2004 is due primarily to $59.413 million in Fresh-Start reporting
adjustments required upon the companys emergence from Chapter 11 bankruptcy and $18.779 million in reorganization expenses incurred throughout the bankruptcy. In addition, interest expense is higher in 2004 because of the amortization and
write-off of deferred financing fees exceeding the reduction in interest expense results from the impairment of the Companys Senior Subordinated Notes.



The Company operates its businesses as three reporting segments focused on its key markets served. The segments align operations that share business
strategies and that are related by geography and product mix and reflect the way management evaluates the operating performance of its business. The operations are reported as: Great Lakes Minerals, which is the largest and only fully integrated
producer and bulk transporter of limestone on the Great Lakes and combines the Companys Michigan Limestone, Marine Services and Erie Sand and Gravel operations; Global Stone, whose lime, limestone fillers, chemical limestone and construction
aggregate businesses operate primarily in the Southeast and Mid-Atlantic regions; and Performance Minerals, which mines and processes specialized industrial minerals, primarily high-purity silica sands and muscovite mica. The operating results of
the Companys business segments for 2004, 2003 and 2002 are discussed below.



Great Lakes Minerals Segment



Net sales
and operating revenues of the Great Lakes Minerals segment were $174.983 million in 2004 compared to $147.291 million in 2003 and $156.920 million in 2002. Net sales increased approximately 19% and 12% in 2004 compared to 2003 and 2002,
respectively. The increase in net sales and operating revenues in 2004 compared with 2003 was due to volume increases and was attributable to two factors: (1) increased vessel revenues, which were the result of higher market demand, the sailing of
additional vessels, higher water levels and higher energy pass-throughsthe higher water levels permit heavier lading of the vesselsand (2) higher tonnage demand for metallurgical (22%) and aggregate limestone (17%) due to general
economic improvement and the recovery of the U.S. integrated steel industry. The Company also generated additional revenue through its ship repair business at its Erie location offset by the disposition of Eries Redi-Mix assets. The increase
for 2004 compared with 2002 is primarily related to the January 2003 Erie Sand and Gravel acquisition and revenue increases from the vessel fuel pass-throughs.



Cost of goods sold and operating expenses totaled $137.798 million, $116.922 million and $113.636 million in 2004, 2003 and 2002, respectively. As a
percentage of net sales and operating revenues, cost of goods sold and operating expenses were 79% in 2004 compared with 79% in 2003 and 72% in 2002. The comparability in the operating margin as a percentage of net sales and operating revenues from
2004 to 2003 is primarily a result of the higher production levels, which generate cost efficiencies by absorbing fixed costs and higher water levels, which increase revenues with little impact on costs, offset by higher fuel costs. The 7% increase
in cost of goods sold and operating expenses as a percentage of net sales and operating revenues in 2004 compared to 2002 was



49



---

Results of Operations(Conditions)



primarily due to the effect of significant increases in energy costs, an increase in the cost of providing health benefits to employees and the addition of
Erie Sand and Gravel, which is a lower gross margin business than the segments quarries and vessels.



The segments operating income for 2004 was $12.997 million compared with $4.990 million in 2003 and $18.858 million in 2002. In the first quarter,
the Company recorded a $1.315 million impairment charge related to the exit and sublease of the former headquarters office of the Marine Services business. Management believes that excluding the impairment charges provides a better comparison of
year-to-year operating results. Excluding the impairment charge, the operating income for the year ended December 31, 2004 is $14.312 million. The significant increase in the operating income in 2004 compared with 2003 is due to increased demand and
volume efficiencies, higher water levels and a lower provision for doubtful accounts receivable. These gains were partially offset by increases in energy and retiree healthcare costs. In addition, minor damage was sustained to one of the vessels in
the third quarter, which resulted in a two-week lay-up and costs associated with the repair. The 31% decrease in 2004 operating income as compared to 2002, was primarily the result of the increase in cost of goods sold and operating expenses as a
percentage of net sales and operating revenues discussed above and the leasehold impairment.



Global Stone Segment



Net sales for the Global Stone segment were $165.425 million, $173.272 million and $161.220 million in 2004, 2003 and 2002, respectively. The 5% decrease in 2004 was primarily the result of the sale of the Lawn and Garden bagging business,
which was sold in the third quarter of the 2003. Lawn and Garden net sales for 2003 were $21.503 million. This segment benefited in 2004 compared with 2003 from increased tonnage demand for aggregate (13%), chemical limestone (primarily roofing
fillers and carpet fillers) (9%) and lime (4%). Additionally, this segment is experiencing pricing power in certain markets due to the strong demand, the fact that the segments mid-Atlantic lime group is running at full capacity and a
significant increase in demand from steel markets. The 3% increase in net sales between 2004 and 2002 was primarily due to the same factors listed above, partially offset by the sale of the segments Lawn & Garden business in October.



Cost of goods sold for the segment totaled $128.581 million in
2004 compared to $137.466 million in 2003 and $122.550 million in 2002. As a percentage of net sales, cost of goods sold was 78%, 79% and 76% in 2004, 2003 and 2002, respectively. The 1% decrease in the percentage of cost of goods sold to net sales
between 2004 and 2003 was a result of efficiencies gained with increased production, lower inventory write-offs in 2004 and the effects of poor weather conditions in early 2003, including flooding at the segments operating locations in
Luttrell, Tennessee, and around Buchanan, Virginia. These cost of goods sold decreases were partially offset by an increase in 2004 for maintenance and energy costs. The 2% increase in cost of goods sold as a percentage of sales between 2004 and
2002 was attributed to an increase in maintenance and energy expenses in 2004.



Operating income for the segment was $14.608 million in 2004 compared to $12.424 million in 2003 and $15.284 million in 2002. There was an 18% increase in operating income between 2004 and 2003, despite a 4% decrease
in net sales. This increase was mainly attributed to the sale of the Lawn and Garden business in the third quarter of 2003, which was a lower margin business for the Global Stone segment. Increased efficiencies gained from increased production in
the current year, increases in pricing power in certain markets and lower inventory write-offs compared with 2003 all contributed to improved operating income. These increases in operating income were offset partially by higher maintenance and
energy costs in 2004. The 4% decrease in operating income between 2004 and 2002 was primarily the result of the higher energy and maintenance costs in 2004 compared with 2002 and higher amortization of capitalized stripping.



Performance Minerals Segment



Net sales of the Performance Minerals segment were $99.024 million, $87.662
million and $85.920 million in 2004, 2003 and 2002, respectively. The 13% increase in net sales between 2004 and 2003 was primarily



50



---

Results of Operations(Conditions)



attributed to increased demand and market share gains for frac sand from oil and gas service companies, an increase in the freight revenues related to
increased demand, increased activity in the California housing market, which enhanced building materials sales and the further expansion of the Mexican foundry sands market. Sand tons sold into the energy market (primarily frac tons) increased 33%
in 2004 from 2003. Net sales in 2004 increased 15% as compared to 2002 primarily because the increased demand and market share for frac sands. Tonnage in the energy market in 2004 is up 77% compared to 2002.



Cost of goods sold for the segment totaled $71.453 million in 2004 compared
to $64.754 million in 2003 and $61.968 million in 2002. As a percentage of net sales, cost of goods sold was 72%, 74% and 72% in 2004, 2003 and 2002, respectively. The 2% decrease in the percentage of cost of goods sold to net sales between 2004 and
2003 was primarily due to increased sales of high margin frac sand, overall efficiencies gained from increased volumes, partially offset by the effects of increased energy costs. Cost of goods sold as a percentage of net sales is comparable between
2004 and 2002.



Operating income in 2004 was $9.664 million
compared to operating loss of $2.903 million in 2003 and operating income of $11.481 million in 2002. The operating loss in 2003 includes a non-cash, pre-tax impairment charge of $13.114 million to reduce the net book value of the segments
Specialty Minerals operation to its estimated fair value. The operating loss in 2004 includes a non-cash pre-tax impairment charge of $5.695 million for the further write-down of the Velarde, New Mexico operation due to a temporary suspension of
operations at that plant. Management believes that excluding the impairment charges provides a better comparison of year-to-year operating results. For comparison purposes, excluding the impairment charges, operating income in 2004 and 2003 was
$15.359 million and $10.211 million, respectively. The 50% increase in operating income compared to 2003 is due to the increase in frac sales results from increased demand and improved market share, the increased efficiencies gained in the current
year through increased volumes and the change in the product mix sold to higher margin product. In addition, 2004 operating income increased as a result of lower SFAS No. 143 depreciation and accretion expense. These increases were partially offset
by the increase in energy costs. For comparison purposes, excluding the impairment charge, operating income increased 34% between 2004 and 2002 primarily because of the increase in net sales and decrease in the percentage of cost of goods sold to
net sales detailed above offset by increased energy costs and SFAS No. 143 depreciation.



Depreciation, Depletion, Amortization and Accretion



The 4% decrease in depreciation, depletion, amortization and accretion expense between 2004 and 2003 was primarily the result of additional SFAS No. 143
depreciation in 2003 for the Performance Minerals segments Velarde and Orange County operating locations, decreased depreciation due to the sale of Global Stones Lawn and Garden business unit as well as Great Lakes Minerals
Redi-Mix operations and decreased amortization of capitalized stripping costs at the Global Stone segments Luttrell, Tennessee, operating location. The result of adopting SFAS No. 143 at January 1, 2003, increased capitalized stripping
amortization and the acquisition of Erie Sand and Gravel in January 2003 contributed to the 8% increase between 2004 and 2002.



General, Administrative and Selling Expenses



General, administrative and selling expenses, including the provision for doubtful accounts, as a percentage of net sales and operating revenues were 9%
in 2004 and 11% in 2003 and 9% in 2002. A lower provision for doubtful accounts and lower legal and professional fees were the major contributors to the 2% decrease in general, administrative and selling expense as a percentage of sales. Legal and
professional fees in 2003 expense include professional and legal fees of approximately $4.4 million in 2003 that are similar to expenses being grouped as reorganization items, net, in 2004. Additional benefits were seen in headcount reductions and
reduced pension expense. These gains were partially offset by higher corporate insurance and higher salaried incentive awards. General, administrative and selling expenses as a percent of sales are comparable in 2004 and 2002 as increasing retiree
healthcare expense was offset by a lower provision for doubtful accounts.



51



---

Results of Operations(Conditions)



Restructuring, Asset Impairments and Voluntary Early Retirement



The following summarizes the provision for restructuring, asset impairments
and early retirement programs and the remaining reserve balance at December 31, 2004 (in thousands):



|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------------------------ | - | ------- | ---------------- |  | - | ------ | - |  | - | ------- | -
|                                                  |  | Employee Retirement & Severance Benefits |        |   | Asset Impairment Charges |   |         | Other Exit Costs |  |   | Total  |  
|Beginning reserve at January 1, 2002              |  | $                                        | 2,563  |   |                          | $ | -0-     |                  |  | $ | 2,280  |   |  | $ | 4,843   |  
|                                                  |  |                                          |        |  
|2002 charge                                       |  |                                          |        |   |                          |   | 1,154   |                  |  |   |        |   |  |   | 1,154   |  
|Amounts utilized                                  |  |                                          |        |   |                          |   | (1,154  | )                |  |   |        |   |  |   | (1,154  | )
|Actual expenditures                               |  |                                          | (1,500 | ) |                          |   |         |                  |  |   | (1,077 | ) |  |   | (2,577  | )
|Provisions and adjustments to prior Reserves, net |  |                                          | (298   | ) |                          |   |         |                  |  |   | 66     |   |  |   | (232    | )
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|Remaining reserve at December 31, 2002            |  | $                                        | 765    |   |                          | $ | -0-     |                  |  | $ | 1,269  |   |  | $ | 2,034   |  
|                                                  |  |                                          |        |  
|2003 charge                                       |  |                                          |        |   |                          |   | 13,272  |                  |  |   |        |   |  |   | 13,272  |  
|Amounts utilized                                  |  |                                          |        |   |                          |   | (13,272 | )                |  |   |        |   |  |   | (13,272 | )
|Actual expenditures                               |  |                                          | (759   | ) |                          |   |         |                  |  |   | (428   | ) |  |   | (1,187  | )
|Provisions and adjustments to prior Reserves, net |  |                                          | 36     |   |                          |   |         |                  |  |   | (87    | ) |  |   | (51     | )
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|Remaining reserve at December 31, 2003            |  | $                                        | 42     |   |                          | $ | -0-     |                  |  | $ | 754    |   |  | $ | 796     |  
|                                                  |  |                                          |        |  
|2004 charge                                       |  |                                          |        |   |                          |   | 7,010   |                  |  |   |        |   |  |   | 7,010   |  
|Amounts utilized                                  |  |                                          |        |   |                          |   | (7,010  | )                |  |   |        |   |  |   | (7,010  | )
|Actual expenditures                               |  |                                          | 17     |   |                          |   |         |                  |  |   | (164   | ) |  |   | (147    | )
|Provisions and adjustments to prior Reserves, net |  |                                          | (28    | ) |                          |   |         |                  |  |   | 464    |   |  |   | 436     |  
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|Remaining reserve at December 31, 2004            |  | $                                        | 31     |   |                          | $ | -0-     |                  |  | $ | 1,054  |   |  | $ | 1,085   |  
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  



During the third
quarter of 2004, the Company recorded a $5.695 million pre-tax asset impairment charge to further reduce the net book value of the Performance Minerals segments Specialty Minerals operations Velarde plant. The impairment indicator was a
temporary suspension of operations of the Velarde plant. The Velarde plant was written down to the estimated fair value based on current market offers.



In the second quarter of 2004, in response to updated information, the Company made an adjustment to increase the Provision for Restructuring, Asset
Impairments and Early Retirement Programs by $500,000 for exit costs related to previously shutdown abrasives facilities.



In the first quarter of 2004, the Company recorded a $1.315 million pre-tax asset impairment charge related to the exit and sublease of the Cleveland
Marine Services office. Of this charge, $1.170 million was primarily related to the difference between base rent due until December 2009 and sublease income that will be received into March 2008. An additional $145,000 pre-tax charge was recorded to
write off leasehold improvements abandoned at the Marine office.



During the second quarter of 2003, the Company recorded a $13.114 million pre-tax asset impairment charge to reduce the net book value of the Performance Minerals segments Specialty Minerals operation to its estimated fair value, as
determined by management based on a third-party appraisal. The charge reduced the carrying value of the operations land, depreciable fixed assets and mineral reserves by $2.610 million, $2.334 million and $8.170 million, respectively. Fair
values were estimated using a discounted cash flow valuation technique incorporating a discount rate commensurate with the risks involved for each group of assets. The remaining 2003 impairment charges of $158,000 were recorded in the fourth quarter
to reduce the carrying value of certain idled equipment of the Global Stone segment.



52



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Results of Operations(Conditions)



During the fourth quarter of 2002, the Company recorded a $1.154 million pre-tax asset impairment
charge to reduce the carrying value of certain idled fixed assets of the Performance Minerals and Global Stone segments to their estimated fair values based on expected future cash flows (essentially zero). The impaired assets primarily represent
machinery, equipment and land improvements that are currently idle and whose future operation is not integral to the long-term strategic direction of the Company.



During 2002, the Company sold non-strategic mineral processing operations closed in conjunction with the 2001 restructuring
with the excess of cash proceeds over carrying value of $959,000 being included in the provision for restructuring, asset impairments and early retirement programs in the Consolidated Statement of Operations.



Other



Interest expense increased 1% and 25% in 2004 as compared to 2003 and 2002, respectively. The primary factor contributing to
this increase was the increased amortization of financing fees due to the financing of two DIP facilities and the write-off of financing fees related to the early payoff of the pre-petition credit facility. Interest expense on bank debt was $38.973
million, $41.292 million and $30.253 million in 2004, 2003 and 2002, respectively, including $4.896 million in 2004, $4.094 million in 2003 and $688,000 in 2002 for the non-cash, payment-in-kind on the Companys Senior Secured Notes. Interest
expense on hedges was $1.274 million in 2004 compared with $7.446 million in 2003 and $9.967 million in 2002. Amendments to the Companys senior debt agreements in September 2003 no longer require the Company to hedge a portion of its interest
rate risk. At December 31, 2004, the Company had no interest rate swaps remaining. Amortization and/or the write-off of fees associated with the Companys bank amendments and refinancing activities increased to $14.173 million in 2004 from
$4.894 million in 2003 and $3.121 million in 2002. The remainder of interest expense in all three years was related to capital leases and notes payable.



Other income, net was $5.941 million and $2.032 million in 2004 and 2003, respectively, compared with other expense, net of $4.121 million in 2002. Other
income in 2004 was mainly comprised of insurance recovery income of $6.533 million. In June 2004, the Company agreed with an insolvent insurance group to settle for $4.668 million in respect of past and future claims. This income was partially
offset by additional amounts charged for the Coal Act liability. Other income in 2003 was mainly comprised of a non-cash gain of $2.408 million to reverse a product liability reserve recorded in 2002 and insurance recovery income of $2.386 million,
partially offset by non-cash charges totaling $2.239 million to reserve for EVTAC Mining and amounts charged for the Coal Act. The primary reason for other expense in 2002 was the Companys reserve of $2.408 million for product liability
claims, which was reversed in 2003 because of the Trust settlement relating to product liability.



The Company utilizes certain tax preference deductions afforded by law to mining companies. Although the amount of these deductions is materially
consistent from year to year, these permanent book/tax differences can cause significant fluctuations in the Companys effective tax rate based upon the level of pre-tax book income or loss. The Company continues to incur tax operating losses
and there is an uncertainty regarding the future realization of any portion of these losses as a tax benefit. Accordingly, the Company has recorded a tax valuation allowance for the deferred tax asset and will maintain such an allowance until
sufficient positive evidence (i.e., cumulative positive earnings and future taxable income) exists to support the reversal. See Note F to the consolidated financial statements for a discussion of the net operating loss carryforwards and a listing of
deductible temporary differences.



Reorganization Items, Net



In applying Fresh-Start reporting, adjustments to
reflect the fair value of assets and liabilities, on a net basis, the restructuring of the Companys capital structure and resulting discharge of the senior lenders pre-petition debt, resulted in net reorganization expense of $59.413
million. In addition, the Company incurred $18.779 million of reorganization expenses throughout 2004 primarily related to legal and professional services.



53



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Results of Operations(Conditions)



Cumulative Effect of Accounting Change



At January 1, 2003, the Company adopted SFAS No. 143, which requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred and capitalized as part of the carrying amount of the long-lived asset. Over time, the liability is recorded at its present value each period through accretion expense, and
the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, a company either settles the obligation for its recorded amount or recognizes a gain or loss.



The Company is legally required by various state and local regulations and/or
contractual agreements to reclaim land disturbed by its quarrying activities and to remove buildings, land improvements and fixed equipment from certain properties. Upon adoption of SFAS No. 143 at January 1, 2003, the Company recorded asset
retirement obligations totaling $5.854 million, increased net property and equipment by $3.574 million and recognized a non-cash cumulative effect charge of $1.391 million (net of income tax benefit of $889,000).



Asset retirement obligations were estimated for each of the Companys
operating locations, where applicable, based on the Companys current and historical experience, adjusted for factors that an outside third-party would consider, such as inflation, overhead and profit. Estimated obligations were escalated based
upon the anticipated timing of the related cash flows and the expected closure dates of the operating locations using an assumed inflation rate, and then were discounted using a credit-adjusted, risk-free interest rate.



The expected closure date of each location represents the estimated
exhaustion date of remaining mineral reserves or, for leased locations, the lesser of the mineral reserve exhaustion date or lease termination date. Because the Companys mineral reserves and lease agreements have expected lives many years into
the future, an appropriate market risk premium could not be estimated or considered when escalating the estimated obligations.



The accretion of the asset retirement obligations and depreciation of the capitalized costs, which are included in depreciation, depletion, amortization
and accretion on the consolidated statement of operations, are being recognized over the estimated useful lives of the operating locations (i.e., to their expected closure dates). A movement of the Companys asset retirement obligations during
the year ended December 31, 2004 follows (in thousands):



|                                                                          |  |                    |       |   |                    |   |      
|------------------------------------------------------------------------- |  | ------------------ | ----- | - | ------------------ | - | -----
|                                                                          |  | PredecessorCompany |       |   | PredecessorCompany
|                                                                          |  | 2004               |       |   | 2003              
|Asset retirement obligations upon adoption at January 1                   |  | $                  | 6,779 |   |                    | $ | 5,854
|Accretion expense                                                         |  |                    | 488   |   |                    |   | 481  
|Provisions and adjustments to prior reserves and actual expenditures, net |  |                    | 571   |   |                    |   | 444  
|Fresh-Start fair value adjustment                                         |  |                    | 758   |   |                    |   | -0-  
|                                                                          |  |                    |       |   |                    |   |      
|Balance at December 31                                                    |  |                    | 8,596 | * |                    |   | 6,779
|                                                                          |  |                    |       |   |                    |   |      



|* |  | Note that December 31, 2004 balance represents the Reorganized Companys liability.
|- |  | -----------------------------------------------------------------------------------



The Company is required to adjust its asset retirement obligation liability to fair value in Fresh-Start reporting, which is
the present value of amounts to be paid determined at appropriate current interest rates. This adjustment increased the asset retirement obligation liability by $758,000. In addition, the Company has valued the fixed asset component of the asset
retirement obligation liability at the same value and eliminated the associated accumulated depreciation previously recorded by the Predecessor Company. The impact is that the Reorganized Company has increased the net land reclamation asset by
$4.821 million with the net credit of $4.063 million being recognized as a reorganization item, net.



54



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Critical Accounting Policies



Managements Discussion and Analysis of Financial Condition and Results of Operations is based upon the Companys
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent liabilities. On a continual basis, the Company evaluates its estimates, including those related to accounts receivable reserves,
inventories, intangible assets, impairment and useful lives of long-lived assets, pensions and other postretirement benefits, restructuring and voluntary early retirement program reserves, asset retirement obligations, taxes and commitments and
contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



The Company believes the following critical accounting policies affect its more significant judgments and estimates used in
the preparation of its consolidated financial statements.



Accounts
Receivable and Revenue Recognition



The Company is
required to estimate the collectability of its trade and note receivables. A considerable amount of judgment is required in assessing the ultimate realization of these receivables. If the financial condition of the Companys customers were to
deteriorate, additional reserves may be required. As part of Fresh-Start reporting, changes were made to the method of reserving accounts. Sales are recognized when products are shipped and the title has transferred to the customer. Operating
revenues are recognized as services are provided to customers. For Great Lakes shipments in process at year-end, the Company recognizes revenue pro-ratably based upon the number of sailing days per voyage. Total net sales and operating revenues
include external freight billed to customers with the related costs included in cost of sales.



Contingencies



The Company is subject to proceedings, lawsuits and other claims related to environmental, labor, product liability and other matters. The Company is required to estimate the likelihood of any adverse judgments or outcomes to these matters
as well as potential ranges of probable losses. Determinations of the amounts or reserves required, if any, for these contingencies are made after careful analysis of each individual issue. The required reserves may change in the future because of
new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters.



Postretirement Benefits



The Companys pension and postretirement benefit costs and credits are developed from actuarial valuations. Inherent in these valuations are key
assumptions including discount rates and expected return on plan assets. The Company considers current market conditions, including changes in interest rates, the age of the Companys workforce and retirees, current health care costs and other
factors, in selecting these assumptions. The Company has made changes to these assumptions in recent periods and future postretirement benefit costs or credits may change based upon changes in these assumptions. The discount rate used by the Company
follows the AA Moodys rate. Asset return calculations are based on the assumption of a 70% bond and 30% equity portfolio. The impact of a 1% reduction in the expected pension return would be approximately $900,000. For further discussion on
the assumptions used for calculating postretirement benefits, see Note J to the consolidated financial statements.



55



---

Critical Accounting Policies(Continued)



All of the Companys pension and postretirement benefit liabilities were reinstated following
the Effective Date of the Plan. Prior to the Effective Date of the Plan, some of the pension plans held shares of old common stock. That old common stock was sold prior to the Effective Date of the Plan and, as such, the plans did not receive
warrants to purchase common stock. As part of the adjustment to fair value for Fresh-Start reporting, the Companys pension and postretirement benefit cost liabilities were adjusted to the projected benefit obligation less fair market value of
assets for pensions and the accumulated projected benefit obligation for other postretirement benefit costs. All past net actuarial losses and unrecognized prior service costs are eliminated in Fresh-Start adjustments. For further discussion on
Fresh-Start adjustments, see Note B to the consolidated financial statements.



Restructuring and Impairment Charges



During 2001, the Company recognized two separate charges for restructuring and a voluntary early retirement program. Inherent in these charges were estimates related to the settlement of contractual obligations and estimates related to the
incremental postretirement benefits awarded to retirees. Additionally, the Company recognized asset impairment charges during 2004, 2003 and 2002. The impairment of fixed assets included estimating fair value less cost to sell.



Asset Retirement Obligations



Inherent in the Companys estimate of asset retirement obligations
under SFAS No. 143, which was initially adopted in the first quarter of 2003, are key assumptions, including inflation rate, discount rate, expected lives of the Companys operating locations and third-party overhead and profit rates. The
estimated obligations are particularly sensitive to the impact of changes in the expected lives and the difference between the inflation and discount rates. Changes in state and local regulations, the Companys contractual obligations,
available technology and overhead rates or profit rates would also have a significant impact on the recorded obligations. The Reorganized Company adjusted its asset retirement obligation liability to fair value in Fresh-Start reporting which is the
present value of amounts to be paid determined at appropriate current interest rates. This adjustment increased the asset retirement obligation liability by $758,000. In addition, the Reorganized Company valued the fixed asset component of the asset
retirement obligation liability at the same value and eliminated the associated accumulated depreciation previously recorded by the Predecessor Company. The impact is that the Reorganized Company increased the net land reclamation asset by $4.821
million and recognized the net credit of $4.063 million as a reorganization item, net.



Deferred Tax Valuation Allowance



The
Company continues to incur tax operating losses and there is an uncertainty regarding the future realization of any portion of these losses as a tax benefit. Accordingly, the Company has recorded a tax valuation allowance for net deferred tax assets
and will maintain such an allowance until sufficient positive evidence (i.e., cumulative positive earnings and future taxable income) exists to support the reversal of the valuation allowance.



In addition to these policies, as of dates after emergence from bankruptcy
and for periods ending after emergence from bankruptcy, the Companys financial statements will also reflect the impact of Fresh-Start reporting. In addition, the application of the going concern basis of accounting involves a range of
subjective judgments, principally in relation to the Companys ability to service existing indebtedness through continued compliance with debt covenants and payment of interest due and the sufficiency of resources to allow the Company to
continue to operate in the ordinary course and thereby realize the Companys assets and discharge liabilities in the normal course of business for a period of 12 months following the date of the Independent Registered Public Accounting Firm
Report included elsewhere in this filing.



Please see Note B to
the consolidated financial statements for a more complete description of the Companys significant accounting policies and Fresh-Start reporting.



56



---

New Accounting Pronouncements



In May 2004, the FASB issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) No. 106-2 Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP FAS No. 106-2). FSP FAS No. 106-2 is effective for interim or annual periods beginning after June 15, 2004. See
Note J to the consolidated financial statements for the effect of FSP FAS No. 106-2.



In December 2004, the Financial Accounting Standard Board (FASB) issued FASB No. 123 (revised 2004), Share-Based Payment(Statement 123(R)), which is a revision of FASB Statement No.
123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash
Flows.



Generally, the approach to accounting for
share-based payments in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial
statements based on their fair values. Pro forma disclosure is no longer an alternative.



Statement 123(R) must be adopted no later than July 1, 2005. Early adoption is permitted in financial statements which have not yet been issued. Due to Fresh-Start reporting, the Company is required to adopt Statement
123(R) as a Fresh-Start adjustment on December 31, 2004. The effects of Statement 123 (R) will be reflected as of January 1, 2005.



Statement 123(R) permits public companies to adopt its requirements using one of two methods:



1. A modified prospective method in which
compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 for all awards
granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date.



2. A modified retrospective method which includes the requirements of the modified prospective method described above, but
also permits entities to restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.



The Company plans to adopt Statement 123(R) using the modified-prospective
method.



In December 2004, the FASB issued SFAS No. 151,
Inventory Costs, an amendment of ARB No. 43, Chapter 4 (SFAS No. 151), which requires that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) be recognized as
current-period charges. In addition, the statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning
after June 15, 2005. Due to Fresh-Start reporting, the Company is required to adopt SFAS No. 151 as a Fresh-Start adjustment on December 31, 2004. Management does not believe the adoption will have a material effect on the Companys results of
operations, financial condition or liquidity.



In December
2004, the FASB issued FSP FAS No. 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers by the American Jobs Creation Act of 2004 (FSP FAS No.
109-1). This statement requires the qualified production activities deduction as defined in the American Jobs Creation Act of 2004 (the Jobs Act) to be accounted for as a special deduction in accordance with SFAS No. 109,
Accounting for Income Taxes. The statement also requires that the special deduction should be considered in measuring deferred taxes when graduated tax rates are a significant factor and when assessing whether a valuation
allowance is necessary. FSP FAS No. 109-1 was effective upon issuance. In accordance with the Jobs Act, determination of the qualified production activities deduction is not required until 2005, however, due to Fresh-Start reporting, the Company is
required to adopt FSP FAS No. 109-1 as a Fresh-Start adjustment on December 31, 2004. Due to the projected tax losses for the next few years, management does not believe that this statement will have a material effect on the Companys results
of operations, financial condition and liquidity.



57



---

|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



The response to this item is submitted in a separate section of this Annual Report on Form 10-K on page 40 under Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



The response to this item is submitted in a separate section of this Annual Report on Form 10-K on pages F-1 through F-51.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



None



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Evaluation of Disclosure Controls and Procedures



The Company maintains a set of disclosure controls and procedures designed to ensure that information disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. The
Companys management, with the participation of the Companys Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of the Companys disclosure controls and procedures
as of the end of the period covered by this report. Based on the evaluation, the CEO and CFO have concluded that the Companys disclosure controls and procedures are effective as of the end of the period covered by this report.



Changes in Internal Control Over Financial Reporting



In connection with managements evaluation, no changes during the
Companys fourth quarter ended December 31, 2004 were identified that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



None.



PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------



Executive Officers of the Registrant



The Executive Officers of the Company are as follows:



|                  |  |     |  |                                                             
|----------------- |  | --- |  | ------------------------------------------------------------
|Name              |  | Age |  | Position                                                    
|Michael D. Lundin |  | 45  |  | President and Chief Executive Officer                       
|Julie A. Boland   |  | 38  |  | Vice President, Chief Financial Officer and Treasurer       
|Sylvie A. Bon     |  | 47  |  | Vice President, Administration and Chief Information Officer
|Michael J. Minkel |  | 53  |  | Vice President, Marketing and Business Development          
|Rochelle F. Walk  |  | 44  |  | Vice President, General Counsel and Secretary               



Michael D. Lundinwas appointed the Companys President and Chief Executive Officer in December 2002, and has served as a Director since December 12, 2001. Prior to serving as a Director, Mr. Lundin served as President and Chief Operating Officer, Oglebay
Norton Company, from November 1, 2001; as Vice President,



58



---

Michigan Operations and President, Michigan Limestone Operations, Inc., a limestone quarry operation, from April 2000; and was President and one of the
owners of Michigan Limestone Operations Limited Partnership for more than five years and up until the partnership was acquired by the Company in 2002. Additionally, Mr. Lundin has served on the Board of Directors of the United Shipping Alliance
since 2002.



Julie A. Bolandwas appointed the
Companys Vice President, Chief Financial Officer and Treasurer on January 1, 2002. From 1999 until 2001, Ms. Boland was Vice President, Credit Risk Management & Advisory Group for Goldman Sachs International, a global investment banking,
securities and investment management firm; was Vice President, Fixed Income, Loan Capital Markets and served in other roles for J.P. Morgan & Co., an investment banking firm, from 1993 to 1999; and was employed as a Certified Public Accountant
for PriceWaterhouse, a public accounting firm, from 1988 to 1991.



Sylvie A. Bonwas appointed the Companys Vice President, Administration and Chief Information Officer in May 2003. Prior to that time, Ms. Bon was appointed the Companys Vice President and Chief Information Officer on May
1, 2002. Prior to joining the Company, Ms. Bon was employed by Avery Dennison, a global producer of office supply and self-adhesive products, where she served as Director, Information Systems, Fasson Roll Worldwide. Prior to that, Ms. Bon served as
Director, Information Systems, Fasson Roll North America; Manager, Information Systems, Avery Dennison Europe, Fasson Roll Division; and Manager, Distribution and Logistics. Ms. Bon was employed by Avery Dennison for more than five years.



Michael J. Minkel was appointed the Companys
Vice President, Marketing and Business Development in July 2003. Prior to that, Mr. Minkel served as the Companys Vice President of Sales and Marketing from November 2002; served Oglebay Norton Specialty Minerals, Inc. as Vice President of
Sales and Marketing from 2000 until 2001; and served as General ManagerKings Mountain Operations from 2001 until 2002. Prior to joining the Company, Mr. Minkel served as President of Exploration Computer Services, an Australian software and
mining-consulting firm, and held various positions in the natural resource industry since 1974, including positions in coal exploration geology and mine planning, oil and gas software sales and consulting, and energy industry-related strategic
information sales and consulting.



Rochelle F. Walkwas
appointed as one of the Companys Vice-Presidents and General Counsel in August 1999 and has served as the Companys Secretary since June 1998. Prior to joining the Company, she was Corporate Counsel, a Business Unit Director and Marketing
Director of the Sherwin Williams Company, a global producer of paints and coatings, from 1990 to 1998, and was an attorney with the law firm of Ulmer & Berne from 1986 to 1990.



Except as noted above, all executive officers of the Company have served in the capacities indicated, respectively, during
the past five years. All executive officers serve at the pleasure of the Board of Directors, with no fixed term of office.



59



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Board of Directors of the Registrant



The Companys Board of Directors currently has seven members. Out of the seven Directors, the holders of convertible
preferred stock designated five Directors: DeLyle W. Bloomquist, Eugene I. Davis, Laurence B. Goddard, Robert H. Kanner, and Thomas O. Boucher Jr.; and management designated Michael D. Lundin and John P. OBrien. Of the five Directors
designated by holders of Senior Subordinated Notes who were party to the commitment agreement and who received shares of convertible preferred stock, one of such Directors, Mr. Boucher, was designated by such of Senior Subordinated Notes who became
holders of common stock. The biographies of each of the Directors are included below:



|                       |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |              
|---------------------- |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                   |  | Age |  | Principal Occupation, Business Experience and Other Directorships                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | DirectorSince
|DeLyle W. Bloomquist   |  | 45  |  | President and Chief Executive Officer of General Chemical Industrial Products, Inc. (formerly General Chemical Corporation), a producer of soda ash and calcium chloride, since April 2004. He
served as Vice President and Chief Operating Officer of General Chemical Group, Inc. from April 1999 until March 2004. He served as Vice President and General Manager of the Industrial Chemicals division of General Chemical Corporation, from January
1996 until April 1999. Mr. Bloomquist has served on the Board of Directors of General Chemical Industrial Products, Inc. since April 1999. General Chemical Industrial Products, Inc. filed a pre-packaged Chapter 11 bankruptcy plan in
December 2003 and emerged from bankruptcy on March 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 2005         
|                       |  |     | 
|Thomas O. Boucher, Jr. |  | 47  |  | Managing Director of Ingalls & Snyder LLC, a broker dealer and registered investment advisor, since January 1996. He has served as General Partner of Ingalls & Snyder Value Partners,
L.P., an investment partnership focused primarily on high yield corporate bonds, since December 1992.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 2005         
|                       |  |     | 
|Eugene I. Davis        |  | 50  |  | Chairman and Chief Executive Officer of Pirinate Consulting Group, LLC, a consulting firm specializing in crisis and turn-around management, liquidation and sales management, merger and
acquisition consulting, hostile and friendly takeovers, proxy contests and strategic planning advisory services for public and private business entities, since 1999. Previously, he was Chief Operating Officer of Total-Tel USA Communications, Inc.,
an integrated telecommunications provider, from 1998 until 1999. He served as Director of Emerson Radio Corp., an international distributor of electronic products, from 1990 to 1997, as Executive Vice President and Interim Chief Financial Officer
from 1992 to 1994, as President from 1994 to 1997 and as Vice Chairman in 1997. Mr. Davis served as Chief Executive Officer and Director of Sport Supply Group, Inc., a distributor of sporting goods and athletic equipment, from 1996 to 1997 and as
Vice Chairman in 1997. Mr. Davis has been Chairman of Atlas Air Worldwide Holdings, Inc. since July 2004 and Chairman of General Chemical Industrial Products, Inc. since May 2004. He is on the Boards of Directors of Telcove, Inc., Metals USA, Inc.,
Tipperary Corporation and Exide Technologies and is the chair of the compensation committee of Exide Technologies. |  | 2005         



60



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|                    |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |              
|------------------- |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                |  | Age |  | Principal Occupation, Business Experience and Other Directorships                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | DirectorSince
|Laurence V. Goddard |  | 52  |  | President, Chief Executive Officer and a Director of The Parkland Group, Inc., a consulting firm focusing on business turnarounds, performance and value enhancement. He served as Vice
President and Director of York Publishing Company in 2003. Mr. Goddard served as President and Chief Executive Officer of Waco International Corporation, a manufacturer and distributor of construction equipment and supplies from 1982 until
1990.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | 2005         
|                    |  |     | 
|Robert H. Kanner    |  | 57  |  | Director and Executive Officer of Pubco Corporation, a manufacturer of computer printer and labeling supplies, labeling devices and specialized construction products, since 1983, and is
currently Pubco Corporations Chairman, President and Chief Executive Officer. Prior to 1999, Mr. Kanner also served as Chief Financial Officer of Pubco Corporation. Mr. Kanner is a Director and limited partner of Gummed Papers of America L.P.,
a provider of sheet-fed label paper and specialty products to the printing industry. He has served as Chairman and Chief Financial Officer of Aspen Imaging International, Inc. and Chairman and Chief Financial Officer of Bobbie Brooks, Incorporated
through June 1996 when they were acquired by Pubco Corporation. He served as Director of Riser Foods Inc. between 1988 and 1997 and Director of ClevTrust Realty Investors between 1992 and 1998. He also served as Director of Prime Retail Inc. between
2001 and 2002. He has been a Director of Beverly Hills Bancorp Inc. (formerly known as Wilshire Financial Services Group Inc.) since 2002. |  | 2005         
|                    |  |     | 
|Michael D. Lundin   |  | 45  |  | President and Chief Executive Officer of Oglebay Norton Company since December 2002, and has served as a Director of Oglebay Norton Company since December 12, 2001. Prior to serving as a
Director, Mr. Lundin served as President and Chief Operating Officer, Oglebay Norton Company, from November 1, 2001; as Vice President, Michigan Operations and President, Michigan Limestone Operations, Inc., a limestone quarry operation, from April
2000; and was President and one of the owners of Michigan Limestone Operations Limited Partnership for more than five years and up until the partnership was acquired by the Company in 2002. Additionally, Mr. Lundin has served on the Board of
Directors of the United Shipping Alliance since 2002.                                                                                                                                                                                                                                                                                                                                                 |  | 2001         
|                    |  |     | 
|John P. OBrien     |  | 63  |  | Managing Director of Inglewood Associates, Inc., a private investment and consulting firm specializing in turnarounds of financially underperforming companies, litigation support and
valuation services. Previously, Mr. OBrien served as Chairman of the Board and Chief Executive Officer of Jeffrey Mining Products, L.P., a manufacturer and distributor of underground mining products, from October 1995 until June 1999. He has
served as the Chairman of the Board of Directors of Allied Construction Products, LLC, a manufacturer and distributor of hydraulic and pneumatic demolition, compaction, and horizontal boring tools and trench shoring devices, since 1993, and is on
the Boards of Directors of Century Aluminum Company and Preformed Line Products.                                                                                                                                                                                                                                                                                                                           |  | 2003         



The Companys
Board of Directors has determined that Directors, Eugene I. Davis, Laurence V. Goddard and John P. OBrien qualify as the Companys audit committee financial experts, within the meaning of



61



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applicable Securities and Exchange Commission regulations, serving on the Companys Audit Committee due to their experience and professional education,
including their business experience listed in the above table. The Companys Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act and all members of the Companys Audit Committee are independent under
applicable NASDAQ independence standards and Rule 10A-3 under the Exchange Act.



The election process for the Board of Directors is as follows:



| |  |  | the holders of the convertible preferred stock, voting as a separate class, elect the convertible preferred stock number at each annual election of the Directors, which
is a maximum of four. In case of any removal, either with or without cause, of a Director elected by the holders of the convertible preferred stock, the holders of the convertible preferred stock are entitled, voting as a separate class either by
written consent or at a special meeting, to elect a successor to hold office for the unexpired term of the Director who has been removed. In case of any vacancy (other than removal) in the office of a Director elected by the holders of the
convertible preferred stock, the vacancy will be filled by the remaining Directors elected to the Board of Directors by the holders of the convertible preferred stock; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the remaining Directors will be elected by holders of common stock voting separately as a single class. In case of any removal, either with or without cause, of a Director elected
by the holders of common stock, the holders of common stock are entitled, voting as a separate class either by written consent or at a special meeting, to elect a successor to hold office for the unexpired term of the Director who has been removed.
In case of any vacancy (other than removal) in the office of a Director elected by the holders of common stock, the vacancy will be filled by the remaining Directors elected to the Board of Directors by the holders of common stock.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For purposes of this description, the
convertible preferred stock number means, at any given time, for so long as (1) at least 75% of the shares of convertible preferred stock outstanding as of January 31, 2005 remain outstanding, a maximum of four Directors, (2) less than
75%, but more than 50%, of the shares of convertible preferred stock outstanding as of January 31, 2005 remain outstanding, a maximum of three Directors, (3) the percentage of the shares of convertible preferred stock outstanding as of January 31,
2005 that remain outstanding is equal to or between 25% and 50%, a maximum of two Directors, and (4) less than 25% of the shares of convertible preferred stock outstanding as of January 31, 2005 remain outstanding, a maximum of one Director.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires the Companys Directors and
executive officers and persons who own more than 10% of any class of any of the Companys equity securities registered pursuant to Section 12 of the Exchange Act to file reports of ownership and changes in ownership on Forms 3, 4, and 5 with
the Securities and Exchange Commission. The Company periodically reminds its Directors and executive officers of their reporting obligations and assists in making the required disclosure once the Company is notified that a reportable event has
occurred. The Company is required to report in this Annual Report on Form 10-K any failure by any of the above mentioned persons to make timely Section 16 reports.



Based solely on the Companys review of copies of forms that the Company has received, and written representations from
the Companys Directors and executive officers, the Company is unaware of any instances of noncompliance, or late compliance, with Section 16(a) filing requirements by its Directors, executive officers or greater than 10% stockholders during
2004, except that, during the fourth quarter of 2004, William G. Pryor, a former Director of the Company, failed to timely report certain sales transactions involving his ownership of the Companys old common stock.



Bankruptcy



On February 23, 2004, the Company and all of its direct and indirect wholly-owned subsidiaries filed for voluntary petitions
for reorganization under Chapter 11 of the Bankruptcy Code to pursue a financial



62



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restructuring that would permit the Company to reduce its indebtedness and provide more financial flexibility to implement its business strategy. The Plan
was confirmed by the Bankruptcy Court on November 17, 2004. The Plan became effective and the Company emerged from Chapter 11 on January 31, 2005.



Code of Conduct and Ethics



The Company maintains a Code of Conduct and Ethics that covers all employees, including its principal executive officer, principal financial officer, and
principal accounting officer, or persons performing similar functions. The Companys Code of Conduct and Ethics is available on the Companys internet site at www.oglebaynorton.com.



|ITEM 11. | DIRECTOR AND EXECUTIVE COMPENSATION
|-------- | -----------------------------------



Post-Emergence Director Compensation



Each of the Companys non-employee Directors is paid compensation as is determined by the Company. These Directors may not participate in the
management stock plan.



On January 31, 2005, the Companys
Organization and Compensation Committee adopted a compensation scheme for the members of the Board of Directors. Mr. Boucher, as the Chairman of the Board of Directors and the Chair of the Executive Committee of the Board, will receive a retainer of
$100,000 per year. Mr. Boucher will not receive any additional retainers as compensation for his services. Each of the other members of the Board of Directors will receive a retainer of $45,000 per year. The Chair of the Audit Committee will receive
an additional retainer of $10,000 per year for his services, and the Chairs of each of the other committees (excluding the Executive Committee, but including the Organization and Compensation Committee and the Nominating and Governance Committee)
will each receive an additional retainer of $3,000 per year for their respective services. All retainers will be paid quarterly in advance of each calendar quarter.



In connection with meeting fees, the Organization and Compensation Committee also decided that each member of the Board of
Directors, including the Chairman of the Board, will be paid $2,000 for each full meeting of the Board of Directors or a committee of the Board of Directors attended in person and $1,000 for each full meeting of the Board of Directors or a committee
of the Board of Directors attended telephonically; provided, however, in the event a Director attends two or more meetings on the same calendar day, the fee for each meeting attended after the first will be $1,000 per meeting and the maximum daily
fee earned will not exceed $4,000. All meeting fees will be paid quarterly in arrears. Employee Directors, however, shall not be entitled to receive any retainer or any meeting fees for their services. Directors are reimbursed for expenses they
incur in attending Board and committee meetings.



Pre-Emergence Director
Compensation



Prior to the Effective Date of the Plan,
except for the Chairman of the Board, Directors who were not the Companys employees received a fee of $12,000 per year and $900 for each Board and committee meeting attended, including meetings of non-standing subcommittees. Committee Chairs
received $1,200 for each committee meeting they chaired. The Chairman of the Board received annual compensation of $100,000. Except for the Chairman of the Board, Directors who were not the Companys employees also received an annual award of
800 shares of common stock under the Oglebay Norton Company Director Stock Plan. Directors were reimbursed for expenses they incurred in attending Board and committee meetings.



In 1998, the shareholders approved the Oglebay Norton Company Director Fee Deferral Plan (the Director Fee Deferral
Plan). The Director Fee Deferral Plan, which was amended and restated effective January 1, 2002, permitted non-employee Directors to defer all or part of the cash portion of their compensation into:



| |  |  | share units based upon the market price of the Companys old common stock at the date on which the cash computation otherwise would have been paid; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an account as deferred cash that was credited with a market rate of interest.
| | - |  | -----------------------------------------------------------------------------



63



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In addition, amounts deferred into share units received a 25% matching credit by the Company, including a
25% matching credit for deferred dividend equivalents. Since 2002, Directors also have been able to defer part or all of their annual award of old common stock under the Director Stock Plan on the same terms as provided in the Director Fee Deferral
Plan. Prior to the termination of the Director Fee Deferral Plan, certain Directors elected to receive share units instead of deferred cash plus interest. The Director Fee Deferral Plan was terminated effective as of May 1, 2004. Upon termination,
in accordance with the terms of the Director Fee Deferral Plan, deferred share units were converted into shares of old common stock and distributed to participants. Such participants who held shares of record of the old common stock as of the close
of business on the warrant distribution record date received warrants in connection with the Plan, exercisable until March 2, 2005, to purchase shares of common stock.



Compensation Committee Interlocks and Insider Participation



During 2004, Messrs Malvin E. Bank, William G. Bares, James T. Bartlett, Albert C. Bersticker, John P. OBrien and
William G. Pryor and Ms. Madeleine W. Ludlow served on the Compensation, Organization and Governance Committee.



During 2004, none of the executive officers or Directors was a member of the Board of Directors or compensation committee of any other company where the
relationship would be construed to constitute a committee interlock within the meaning of the rules of the SEC.



Summary Compensation Table



The table below shows individual compensation information for the Companys Chief Executive Officer and the Companys four most highly
compensated executive officers other than the Chief Executive Officer (the named executive officers).



|                                                                           |  |              |  |                     |                       |                 |   |                             |  |                          |  |                                       |  |                    |               |                             |   |           |  |   |              
|-------------------------------------------------------------------------- |  | ------------ |  | ------------------- | --------------------- | --------------- | - | --------------------------- |  | ------------------------ |  | ------------------------------------- |  | ------------------ | ------------- | --------------------------- | - | --------- |  | - | -------------
|                                                                           |  |              |  |                     |                       |                 |   |                             |  | Long Term Compensation   |  |                                      
|                                                                           |  |              |  | Annual Compensation |                       | Awards          |   | Payouts                     |  |                         
|Name and Principal Position (1)                                            |  | Year         |  | Salary($)(2)        |                       | Bonus ($)(2)(3) |   | Other AnnualCompensation($) |  | RestrictedStockAwards($) |  | SecuritiesUnderlyingOptions/ SARs (#) |  | LTIPPayouts ($)(5) |               | All OtherCompensation($)(4)
|Michael D. Lundin President and Chief Executive Officer                    |  | 200420032002 |  | $                   | 474,038425,000310,577 |                 | $ | 315,25021,250              |  |                       |  |                                    |  | $                  | 32,00030,000 |                             | $ | 167,633 |  | $ | 14,30010,027
|                                                                           |  |              |  |                     |                       |                 |   |                            
|Julie A. Boland Vice President, Chief Financial Officer and Treasurer      |  | 200420032002 |  |                     | 239,712225,000225,000 |                 |   | 129,37511,25070,000         |  |                       |  |                                    |  |                    | 16,00022,000 |                             |   |        |  |   | 3,5052,865  
|                                                                           |  |              |  |                     |                       |                 |   |                            
|Sylvie A. Bon Vice President, Administration and Chief Information Officer |  | 200420032002 |  |                     | 171,538165,000106,615 |                 |   | 82,1008,25024,651           |  |                       |  |                                    |  |                    | 5,00010,500  |                             |   |        |  |   | 3,1782,665  
|                                                                           |  |              |  |                     |                       |                 |   |                            
|Michael J. Minkel Vice President, Marketing and Business Development       |  | 200420032002 |  |                     | 165,231165,616139,654 |                 |   | 78,9508,000                |  |                       |  |                                    |  |                    | 5,0005,000   |                             |   |        |  |   | 2,4735,981  
|                                                                           |  |              |  |                     |                       |                 |   |                            
|Rochelle F. Walk Vice President, General Counsel and Secretary             |  | 200420032002 |  |                     | 180,231175,000175,000 |                 |   | 86,0008,750                |  |                       |  |                                    |  |                    | 7,0005,000   |                             |   |        |  |   | 2,2218,809  



64



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|(1) |  | Mr. Lundin was appointed President and Chief Executive Officer on December 4, 2002. Ms. Boland joined the Company in January 2002. Ms. Bon joined the Company in May 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes amounts deferred in 2003 by the named executives under the Oglebay Norton Capital Accumulation Plan for salary earned in 2003 or bonus earned in 2002: Bon$11,807; and
Minkel$6,715. Includes amounts deferred in 2002 by the named executives under the Oglebay Norton Capital Accumulation Plan for salary earned in 2002 or bonus earned in 2001: Bon$3,808; and Minkel$20,320. The Oglebay Norton Capital
Accumulation Plan was terminated, effective June 1, 2003. Includes amounts deferred in 2003 and 2002, respectively, by the named executives under the Oglebay Norton Incentive Savings and Stock Ownership Plan: Lundin$12,000 and $10,500;
Boland$10,750 and $5,731; Bon$12,000 and $5,064; Minkel$12,000 and $11,000; and Walk$11,821 and $10,582.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes special bonuses and annual incentive bonuses earned for 2004 approved by the Organization and Compensation Committee of the Board of Directors (and its predecessor
committee) and awarded in 2004 and 2003 to Mr. Lundin, Ms. Boland, Ms. Walk, Mr. Minkel and Ms. Bon for their contributions to the Companys ongoing financial and operating restructuring.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Includes contributions by the Company during 2004, 2003 and 2002, respectively, for the named executives under the Oglebay Nortons Incentive Savings and Stock Ownership Plan:
Lundin$0, $6,000 and $5,250; Boland$0, $3,505 and $2,865; Bon$0, $2,649 and $2,532; Minkel$0, $2,418 and $4,889; and Walk$0, $2,221 and $5,366. Includes contributions by the Company during 2003 and 2002, respectively,
for the named executives under the Oglebay Norton Capital Accumulation Plan: Bon $529 and $133; Minkel$55 and $1,092; and Walk$0 and $0. Also, includes payments by the Company for life insurance premiums for 2004, 2003 and
2002, respectively: Lundin$0, $8,300 and $4,777; and Walk$0, $0 and $3,443.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | The amount was paid in cash in 2003 for the payout earned for the period from 1999 to 2002 under the Oglebay Norton Company 1999 Long-Term Incentive Plan.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



Stock Option Grants



The predecessor to the Organization and Compensation Committee approved the 2002 Stock Option Plan to enable the Company to
attract and retain key members of management, provide incentives and reward performance, and ensure that the interests of key members of management were aligned with the shareholders interests. The 2002 Stock Option Plan was approved by the
shareholders of the Company at the 2002 Annual Meeting. The maximum number of shares of old common stock subject to awards granted under the 2002 Stock Option Plan was 500,000 shares, with no more than 125,000 shares to be awarded in any single
year. Old common stock option awards could be incentive stock options, which are stock options that meet the requirements for qualification under Section 422 of the Internal Revenue Code of 1986, as amended, or non-qualified stock options, which are
stock options that do not qualify as incentive stock options. The exercise price of an old common stock option was to be at or above the closing price of the old common stock on the date of grant. Old common stock options were exercisable for a
period not to exceed ten years from the date of grant. The predecessor to the Organization and Compensation Committee determined when the right to exercise old common stock options vested for each participant granted an award. The options had no
value unless the old common stock price appreciated and the recipient satisfied the applicable vesting requirements. In the event of a change in control, unless otherwise determined by the predecessor to the Organization and Compensation
Committee, all old common stock options then outstanding would have become fully exercisable as of the date of the change in control. All other terms, conditions and restrictions with respect to each award were determined by the predecessor to the
Organization and Compensation Committee.



Under the Plan, the
2002 Stock Option Plan was terminated, all outstanding old common stock options issued under the 2002 Stock Option Plan were cancelled and the holders of such options are no longer able to exercise such options. Additionally, all shares of old
common stock were cancelled under the Plan, and record holders of shares of old common stock with allowed interests under the Plan received warrants, exercisable until March 2, 2005, to purchase up to an aggregate of 576,256 shares of common stock
at an exercise price of $10 per share. Warrants for 404,071 shares of common stock were exercised in the Companys warrant offering.



65



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Option/SAR Grants in Last Fiscal Year



During the last completed fiscal year, none of the named executive officers received grants of stock options.



Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values



During the last completed fiscal year, none of the named
executive officers exercised options and the exercise price for all exercisable as well as all unexercisable options was in excess of the stock price for the Companys old common stock.



Aggregated Option/ SAR Exercises in Last Fiscal Year and Fiscal Year-End

Option/ SAR Values



|            |  |                    |  |                                                                           |      |                                                                    |                |                           |                 
|----------- |  | ------------------ |  | ------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------ | -------------- | ------------------------- | ----------------
|            |  | Shares Acquired on |  | Number ofSecuritiesUnderlyingUnexercisedOptions/SARs atFiscal Year-End(#) |      | Value of UnexercisedIn-the-MoneyOptions/SARs atFiscal Year-End ($)
|Name        |  | Exercise (#)       |  | ValueRealized ($)                                                         |      | Exercisable/ Unexercisable                                         |                | Exercisable/Unexercisable
|M.D. Lundin |  | 0                  |  | $                                                                         | 0.00 |                                                                    | 15,625/ 64,875 |                           | $    0.00/ $0.00
|J.A. Boland |  | 0                  |  |                                                                           | 0.00 |                                                                    | 8,000/ 30,000  |                           | 0.00/   0.00    
|S.A. Bon    |  | 0                  |  |                                                                           | 0.00 |                                                                    | 3,875/ 11,625  |                           | 0.00/   0.00    
|M.J. Minkel |  | 0                  |  |                                                                           | 0.00 |                                                                    | 3,875/ 9,625   |                           | 0.00/   0.00    
|R.F. Walk   |  | 0                  |  |                                                                           | 0.00 |                                                                    | 10,250/ 13,500 |                           | 0.00/   0.00    



Long-Term Incentive Plan



During the last completed fiscal year, none of the named
executive officers received an award under any long-term incentive plan of the Company.



Management Stock Plan



As of January 31, 2005,
the Company implemented the management stock plan to attract, retain and motivate key employees following the Effective Date of the Plan of Reorganization. The terms of the management stock plan were negotiated with the creditors committee.
The management stock plan in many respects replaces certain elements of the 2002 Stock Option Plan. A total of up to 1,328,049 shares of common stock are available for issuance pursuant to restricted stock and/or stock options granted under the
management stock plan and, as of January 31, 2005, 264,837 shares of restricted common stock and 397,255 options to purchase shares of common stock, with a strike price of $12.63 per share, were issued. The remaining shares are available for future
grants. Under the management stock plan, the initial grants of restricted stock vest at the rate of 25% per year over a four-year period commencing on July 1, 2005, and the initial stock options vest at the rate of 33 1/3% per year over a three-year
period commencing on the Effective Date of the Plan. Accelerated vesting applies in certain circumstances specified in the plan document, including a change in control or a termination without cause. The Companys Board of Directors (or a
committee of the Board of Directors) determines the awards of restricted stock and options to be granted under the management stock plan. Management believes that the size and terms of the management stock plan are appropriate, within market terms
and necessary to achieve the goals of attracting, retaining and motivating key employees.



Management Incentive Plan



As of January 31, 2005, the Company implemented the management incentive plan to provide certain key employees with an incentive to remain in the Companys employ following January 31, 2005. The terms of the management incentive plan
were negotiated with the creditors committee. The management incentive plan



66



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includes a retention bonus benefit and a supplemental severance benefit. Under the retention bonus portion of the plan, a total of 44 key employees received
a retention bonus equal to a percentage of their annual base salary, payable 50% upon continued employment as of January 31, 2005, and 50% 90 days after January 31, 2005. The aggregate amount of retention bonuses for the 44 key employees is $2.186
million. A discretionary bonus pool of $250,000 (subject to a cap of $10,000 for any one employee) also was available for distribution to the Companys employees who were not otherwise participating in the retention bonus portion of the plan.
As determined by the Organization and Compensation Committee of the Board of Directors based on recommendations from the Companys Chief Executive Officer and President and approved by the Board of Directors, discretionary bonuses were paid to
41 employees on January 31, 2005. These employees were paid 100% of their respective discretionary bonuses on January 31, 2005. The discretionary bonuses were awarded to employees who made a significant contribution to the Companys successful
reorganization efforts, as recommended by the Companys officers to the Organization and Compensation Committee and the Companys Board of Directors. The discretionary bonuses awarded were not reflective of salary or job level, but rather
were based on merit. Under the supplemental severance portion of the plan, a total of 44 key employees were eligible for a supplemental severance payment equal to either 100% or 50% of their annual base salary, payable, subject to applicable law,
upon termination without cause within 12 months of January 31, 2005, which was the Effective Date of the Plan. The supplemental severance payment will be reduced by one month for each month that such a termination occurs subsequent to January 31,
2005, to a minimum of six months. The maximum cost of the supplemental severance benefits (assuming all eligible employees were immediately terminated) is approximately $4.381 million.



An employees participation in the management incentive plan is in addition to, as applicable, the management stock
plan, any management employment agreements or officer agreements effective on or after January 31, 2005, the Companys annual incentive plan and any other plans or benefits that the Company may provide to the Companys employees in the
ordinary course of business.



Retirement Plans



Qualified Pension Plan and Excess and TRA Supplemental Benefit Retirement Plan



The Company sponsors the Oglebay Norton
Company Pension Plan (the Pension Plan), which is a defined benefit pension plan that covers substantially all of the Companys full-time salaried and some hourly employees at certain locations, and the Oglebay Norton Company Excess
and TRA Supplemental Benefit Retirement Plan (the TRA Supplemental Benefit Retirement Plan), which applies to highly compensated salaried employees. These benefits for eligible employees are based on average annual compensation for the
highest five consecutive years during the last ten years of employment prior to retirement.



67



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The table below shows the annual pension payable under the Pension Plan and the TRA Supplemental Benefit
Retirement Plan at normal retirement age:



|             |  |                                                                                    |         |          |   |          |  |          |         |          |   |         |  |   |        
|------------ |  | ---------------------------------------------------------------------------------- | ------- | -------- | - | -------- |  | -------- | ------- | -------- | - | ------- |  | - | -------
|             |  | Estimated Annual Benefit (Assuming Retirement on January 1, 2005) Years of Service
|Remuneration |  | 15 Years                                                                           |         | 20 Years |   | 25 Years |  | 30 Years |         | 35 Years
|$75,000      |  | $                                                                                  | 16,875  |          | $ | 22,500   |  | $        | 28,125  |          | $ | 33,750  |  | $ | 39,375 
|100,000      |  |                                                                                    | 22,500  |          |   | 30,000   |  |          | 37,500  |          |   | 45,000  |  |   | 52,500 
|150,000      |  |                                                                                    | 33,750  |          |   | 45,000   |  |          | 56,250  |          |   | 67,500  |  |   | 78,750 
|200,000      |  |                                                                                    | 45,000  |          |   | 60,000   |  |          | 75,000  |          |   | 90,000  |  |   | 105,000
|250,000      |  |                                                                                    | 56,250  |          |   | 75,000   |  |          | 93,750  |          |   | 112,500 |  |   | 131,250
|300,000      |  |                                                                                    | 67,500  |          |   | 90,000   |  |          | 112,500 |          |   | 135,000 |  |   | 157,500
|350,000      |  |                                                                                    | 78,750  |          |   | 105,000  |  |          | 131,250 |          |   | 157,500 |  |   | 183,750
|400,000      |  |                                                                                    | 90,000  |          |   | 120,000  |  |          | 150,000 |          |   | 180,000 |  |   | 210,000
|450,000      |  |                                                                                    | 101,250 |          |   | 135,000  |  |          | 168,750 |          |   | 202,500 |  |   | 236,250
|500,000      |  |                                                                                    | 112,500 |          |   | 150,000  |  |          | 187,500 |          |   | 225,000 |  |   | 262,500
|550,000      |  |                                                                                    | 123,750 |          |   | 165,000  |  |          | 206,250 |          |   | 247,500 |  |   | 288,750
|600,000      |  |                                                                                    | 135,000 |          |   | 180,000  |  |          | 225,000 |          |   | 270,000 |  |   | 315,000
|650,000      |  |                                                                                    | 146,250 |          |   | 195,000  |  |          | 243,750 |          |   | 292,500 |  |   | 341,250
|700,000      |  |                                                                                    | 157,500 |          |   | 210,000  |  |          | 262,500 |          |   | 315,000 |  |   | 367,500
|750,000      |  |                                                                                    | 168,750 |          |   | 225,000  |  |          | 281,250 |          |   | 337,500 |  |   | 393,750
|800,000      |  |                                                                                    | 180,000 |          |   | 240,000  |  |          | 300,000 |          |   | 360,000 |  |   | 420,000
|850,000      |  |                                                                                    | 191,250 |          |   | 255,000  |  |          | 318,750 |          |   | 382,500 |  |   | 446,250



Benefits under the
Pension Plan and the TRA Supplemental Benefit Retirement Plan for eligible salaried employees are based on average annual compensation for the highest five years during the last 10 years of employment prior to retirement. Covered compensation is
equal to total base pay and certain incentive compensation (including amounts deferred under the former long-term incentive plan), which is substantially the same as shown in the salary and bonus columns of the Summary Compensation Table shown
above. The annual benefit is calculated by multiplying the participants average compensation by a factor of 1.5% and the participants years of covered service (but not below a minimum benefit unrelated to compensation). Benefits are paid
in a straight life annuity form to unmarried participants and in the form of 50% joint and survivor annuities to married participants and are not subject to reduction for Social Security or other offset.



Certain surviving spouse benefits are also available under the plans, as well
as early retirement and facility shutdown benefits. The benefits table shown above has been prepared without regard to benefit limitations imposed by the Internal Revenue Code. The years of benefit service credited for executive officers named in
the Summary Compensation Table are: Mr. Lundin5.5 years (not including service under a prior plan); Ms. Boland3.83 years; Ms. Bon3.5 years; Mr. Minkel5.83 years; and Ms. Walk7.42 years. Mr. Lundin is also vested in a
benefit earned prior to the acquisition of Michigan Limestone. The benefit is based on 6.08 years of service. If Mr. Lundin were to terminate his employment today, he would be entitled to a monthly benefit of $380 for a total monthly benefit of $773
($9,281 annually) payable at age 65.



The Internal Revenue Code
limits the benefits provided under qualified pension plans. The TRA Supplemental Benefit Retirement Plan is a non-qualified retirement plan that provides benefits to highly compensated salaried employees. The TRA Supplemental Benefit Retirement Plan
provides for the payment, out of the Companys general funds, of the amount that an eligible participant would have received under the Pension Plan but for the Internal Revenue Code limits. The above table, which does not reflect those limits,
shows the total annual pension benefits payable under both the Pension Plan and the TRA Supplemental Benefit Retirement Plan.



68



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Capital Accumulation Plan



Effective January 1, 2000, Oglebay Norton adopted its Capital Accumulation Plan. The Capital Accumulation Plan was
terminated on June 1, 2003, and all amounts due to the participants of the plan were paid out. Prior to its termination, under the Capital Accumulation Plan, certain management and highly compensated employees, who were limited in the amounts of
salary and bonus they could defer pursuant to plans qualified pursuant to ERISA, could elect to defer receipt of salary, bonus and/or long term incentive compensation. Participants were permitted to defer up to 50% of their salary, up to 100% of
their bonus and up to 100% of their long-term incentive compensation, each in 10% increments, payable during the year.



The Capital Accumulation Plan, which was not a qualified plan, provided for the payment, out of the Companys general funds, of the amount deferred,
together with an amount of investment earnings, gains and/or losses, and expenses determined with reference to the performance of certain deemed investment options, as directed by the participant. The Capital Accumulation Plan also
provided an amount equivalent to any benefit not provided to the participant under the Incentive Savings and Stock Ownership Plan by reason of the deferral of compensation under the Capital Accumulation Plan, although no duplication of benefits
provided under any other Oglebay Norton arrangement was permitted. Deferred salary and bonus, and the investment gain or loss on the deferred salary and bonus, under the Capital Accumulation Plan, were fully vested.



Officer Agreements



Officer Agreements Operative Upon Change in Control of Oglebay Norton



Before filing for Chapter 11, the Company and certain of its current and
former executive officers were parties to separate agreements (collectively, the Old Officer Agreements). The Old Officer Agreements were designed to retain those individuals and provide for continuity of management in the event of any
actual or threatened change in control (as defined in the Old Officer Agreements) of the Company. None of the rights of the individuals under the Old Officer Agreements became operative unless there was a change in control of the Company.
Consummation of the Plan did not constitute a change in ownership or change in control under the Old Officer Agreements, and each named executive officer waived any such change in ownership or change in control provision by entering into new Change
in Control and Employment Agreements.



There were two triggers
that applied to the Old Officer Agreements. The first trigger required that a change in control occur. After a change in control, the officer was entitled to continued employment for a 30-month contract term at a compensation rate equal to the
greatest of that in effect immediately before the change in control, that in effect two years before the change in control, or such greater rate as determined by the Company, and certain bonuses, plus certain additional benefits and continued
participation in specified benefit plans as an executive officer (Contract Compensation). The second trigger occurred if, after a change in control, the officer was terminated without cause or the officer terminated his or
her employment for good reason. If the second trigger occurred, then, subject to certain exceptions, the officer was entitled to receive compensation at the highest monthly rate payable to the officer during the 30-month contract term
plus certain bonus awards instead of employment, but only for the longer of the time remaining in the original 30-month contract term (after the change in control) or six months. The officer was also entitled to receive certain additional benefits
under certain circumstances for one year following the 30-month contract term.



After employment termination, however, the officer had to attempt to mitigate damages by seeking comparable employment elsewhere. If the officer was successful, compensation was reduced, dollar-for-dollar, for
compensation and benefits received from the subsequent employer. In addition, the officer agreed not to disclose any of the Companys trade secrets. If and to the extent payments made to the officer on account of a change in control were
treated as excess parachute payments under the Internal Revenue Code, the Old Officer Agreements provided for an additional payment to make the officer whole with respect to additional excise tax payments.



69



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On January 31, 2005, the Company entered into new Change in Control and Employment Agreements with
Michael D. Lundin, Julie A. Boland, Sylvie A. Bon, Michael J. Minkel and Rochelle F. Walk that generally supersede the Old Officer Agreements with these individuals. The terms of the Change in Control and Employment Agreements were negotiated with
the creditors committee. Each Change in Control and Employment Agreement is consistent with the Old Officer Agreements, but subject to the following changes:



| |  |  | the Change in Control and Employment Agreements contain a broader definition of cause and a narrower definition of change of control;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Change in Control and Employment Agreements provide that upon a change of control (as defined in the Change in Control and Employment Agreement), the term of the
employment shall be for a period of 12 months (rather than 30 months);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | during such term, the executive officer will be entitled to receive compensation in an amount equal to the greater of (1) the executive officers base salary in effect
immediately prior to the change of control or (2) the executive officers base salary in effect at any time during the two years preceding the change of control (excluding any mandatory bonus);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | during the year in which the change of control occurs, the executive officer will also be entitled to receive a bonus under the annual bonus plan at a level no less than
the target amount;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the executive officer is terminated without cause or terminates his or her employment for good reason following the change of control, the executive officer will be
entitled to receive severance benefits, subject to applicable law, until the later of (1) six months following termination or (2) the number of months remaining in the 12-month period following the change of control, and such severance
shall be paid at the highest monthly rate calculated based on the amounts payable to the executive officer as provided in the two immediately preceding bullet points; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the executive officer is not obligated to mitigate the amounts paid pursuant to the Change in Control and Employment Agreement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



Irrevocable Trusts



The Company has made commitments under various plans and agreements for supplemental pension benefits, deferred and
executive compensation arrangements, and obligations arising in the event of a change in control, which it has not been required to fund on a current basis. In order to provide assurances that those commitments will be honored, the Company
established three trusts with an independent trustee to provide additional security for these commitments in the event of a change in control. During 2002, the Company terminated one of the trusts and currently has two trusts
remaining.



Irrevocable Trust Agreement II provides
additional assurances for benefits and payments due under the TRA Supplemental Benefit Retirement Plan, the agreements with the Companys former executive officers, certain deferred compensation agreements and the Companys Supplemental
Savings and Stock Ownership Plan. The Supplemental Savings and Stock Ownership Plan provides for cash payment of the amount by which certain participants benefits under the Incentive Savings and Stock Ownership Plan would exceed the Internal
Revenue Code limitations applicable to that plan.



The Oglebay
Norton Company Assurance Trust provides additional assurances for benefits and payments for current executives serving the Company after 2002 due under the Supplemental Savings and Stock Ownership Plan, the Officer Agreements, certain deferred
compensation agreement, and the TRA Supplemental Benefit Retirement Plan. It also provides that, in the event of a threatened change in control, the Company will deposit in a pour-over trust, on an irrevocable basis, 125% of the
aggregate unfunded obligations of the commitments. The trust becomes revocable if, after the threat, no change in control occurs. If a change in control does occur, the trust remains irrevocable.



70



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The Company has not contributed any significant assets to the two trusts. However, the Company retains
the right to make discretionary contributions into the trusts at any time. Assets held in the trusts are subject at all times to the claims of the Companys general creditors. If funds in the trusts are insufficient to pay amounts due under a
plan or agreement, the Company remains obligated to pay those amounts. No employee has any right to assets in the trusts until, and to the extent, benefits are paid from the trusts.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



The information presented below regarding beneficial ownership of our common stock and convertible preferred stock has been
presented in accordance with the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, a person is deemed to be a beneficial owner of a security if that person has or shares
the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security. Under these rules, beneficial ownership includes any security with respect to which a person has the right to acquire sole
or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right.



The following tables set forth, as of March 18, 2005, as to each current Director, each executive officer named in the Summary Compensation Table above,
each beneficial owner of 5% or more of the common stock or convertible preferred stock and all current Directors and executive officers as a group: (1) the number of shares of common stock and convertible preferred stock, and (2) the percent of such
classes, beneficially owned as of the Effective Date of the Plan. As of March 18, 2005, there were 3,597,479 shares of common stock outstanding and 8,500,000 shares of convertible preferred stock outstanding.



Beneficial Ownership



|                                                         |  |                                |  |                 |                                              |  |                                                               |  |                 |  |            |  |                     |  
|-------------------------------------------------------- |  | ------------------------------ |  | --------------- | -------------------------------------------- |  | ------------------------------------------------------------- |  | --------------- |  | ---------- |  | ------------------- | -
|                                                         |  | Common StockBeneficially Owned |  |                 | Convertible PreferredStock BeneficiallyOwned |  | Common Stock andConvertible PreferredStock Beneficially Owned | 
|Name of Beneficial Owner (1)                             |  | Amount (2)(3)                  |  | Percent ofClass |                                              |  | Amount                                                        |  | Percent ofClass |  | Amount (3) |  | Percent ofClass (4) |  
|Directors and Executive Officers                         |  |                                |  |                 |                                              |  |                                                               |  |                 |  |            |  |                     |  
|DeLyle W. Bloomquist                                     |  | 0                              |  | *               |                                              |  | 0                                                             |  | *               |  | 0          |  | *                   |  
|Thomas O. Boucher Jr. (5)                                |  | 293                            |  | *               |                                              |  | 8,839                                                         |  | *               |  | 9,132      |  | *                   |  
|Eugene I. Davis                                          |  | 0                              |  | *               |                                              |  | 0                                                             |  | *               |  | 0          |  | *                   |  
|Laurence V. Goddard                                      |  | 0                              |  | *               |                                              |  | 0                                                             |  | *               |  | 0          |  | *                   |  
|Robert H. Kanner                                         |  | 0                              |  | *               |                                              |  | 0                                                             |  | *               |  | 0          |  | *                   |  
|John P. OBrien                                          |  | 0                              |  | *               |                                              |  | 0                                                             |  | *               |  | 0          |  | *                   |  
|Michael D. Lundin                                        |  | 119,886                        |  | 3.30            | %                                            |  | 0                                                             |  | *               |  | 119,886    |  | *                   |  
|Julie A. Boland                                          |  | 43,957                         |  | 1.22            | %                                            |  | 0                                                             |  | *               |  | 43,957     |  | *                   |  
|Sylvie A. Bon                                            |  | 23,976                         |  | *               |                                              |  | 0                                                             |  | *               |  | 23,976     |  | *                   |  
|Michael J. Minkel                                        |  | 23,976                         |  | *               |                                              |  | 0                                                             |  | *               |  | 23,976     |  | *                   |  
|Rochelle F. Walk                                         |  | 23,976                         |  | *               |                                              |  | 0                                                             |  | *               |  | 23,976     |  | *                   |  
|Executive officers and Directors as a group (11 persons) |  | 236,064                        |  | 6.42            | %                                            |  | 8,839                                                         |  | *               |  | 244,903    |  | 2.01                | %



71



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Beneficial Owners of 5% or More of Common Stock and/or Convertible Preferred Stock



|                                                                                                           |  |         |  |                                |  |                  |                                               |  |         |                                                               |                  |   |  |           |  |                      |  
|---------------------------------------------------------------------------------------------------------- |  | ------- |  | ------------------------------ |  | ---------------- | --------------------------------------------- |  | ------- | ------------------------------------------------------------- | ---------------- | - |  | --------- |  | -------------------- | -
|                                                                                                           |  |         |  | Common StockBeneficially Owned |  |                  | Convertible PreferredStock Beneficially Owned |  |         | Common Stock andConvertible PreferredStock Beneficially Owned |                 
|Name of Beneficial Owner(1)                                                                                |  |         |  | Amount (2)                     |  | Percent of Class |                                               |  | Amount  |                                                               | Percent of Class |   |  | Amount    |  | Percent of Class (4) |  
|Ingalls & Snyder Value Partners, L.P. 61 Broadway, New York, NY 10006                                      |  | (6)(11) |  | 254,784                        |  | 7.08             | %                                             |  | 903,392 |                                                               | 10.63            | % |  | 1,158,176 |  | 9.57                 | %
|                                                                                                           |  |         |  |                                |  |                  |                                              
|Pacholder Associates, Inc. 8044 Montgomery Rd. Suite 555 Cincinnati, Ohio 45236                            |  | (7)     |  | 219,380                        |  | 6.10             | %                                             |  | 648,804 |                                                               | 7.63             | % |  | 868,184   |  | 7.18                 | %
|                                                                                                           |  |         |  |                                |  |                  |                                              
|Tontine Capital Partners, L.P. 55 Railroad Avenue, 3rd Floor, Greenwich, CT 06830                          |  | (8)     |  | 248,844                        |  | 6.92             | %                                             |  | 48,750  |                                                               | *                |   |  | 297,594   |  | 2.46                 | %
|                                                                                                           |  |         |  |                                |  |                  |                                              
|Recon Arbitrage Master Fund, Ltd. c/o Recon Capital, LLC 599 Lexington Ave. 35th Floor, New York, NY 10022 |  | (9)     |  | 273,214                        |  | 7.59             | %                                             |  | -0-     |                                                               | *                |   |  | 273,214   |  | 2.26                 | %
|                                                                                                           |  |         |  |                                |  |                  |                                              
|Fairfield Greenwich Limited 919 Third Avenue, New York, NY 10022                                           |  | (10)    |  | 200,000                        |  | 5.56             | %                                             |  | -0-     |                                                               | *                |   |  | 200,000   |  | 1.65                 | %

---

|* |  | Represents less than 1% of the outstanding convertible preferred stock or the outstanding common stock, as applicable.
|- |  | ----------------------------------------------------------------------------------------------------------------------

|(1) |  | Except as otherwise stated in the notes below, beneficial ownership of the shares held by each individual consists of sole voting and investment power, or of voting power and
investment power that is shared with the spouse and/or a child of that individual.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Excludes the number of shares of common stock issuable upon conversion of the convertible preferred stock.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(3) |  | Includes (A) restricted shares of common stock awarded under the management stock plan as follows: Ms. Boland29,304; Ms. Bon15,984; Mr. Lundin79,924; Mr.
Minkel15,984; and Ms. Walk15,984; and (B) shares of common stock obtainable upon exercise of stock options within 60 days following March 18, 2005 as follows: Ms. Boland14,653; Ms. Bon7,992; Mr. Lundin39,962; Mr.
Minkel7,992; and Ms. Walk7,992. These restricted shares of common stock awarded under the management stock plan vest at a rate of 25% per year over a four-year period commencing on July 1, 2005 (subject to accelerated vesting
circumstances as specified in the management stock plan).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Percent of Class denotes the percentage of common stock based on the assumption of the conversion of all 8,500,000 shares of convertible preferred stock into 8,500,000 shares of
common stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | The address for Mr. Boucher is c/o Ingalls & Snyder, LLC, 61 Broadway, New York, New York 10006. Mr. Boucher disclaims ownership of the securities held by Ingalls & Snyder
Value Partners, L.P. and reported pursuant to the Schedule 13D filings described in footnote 6 below in excess of his economic interest in Ingalls & Snyder Value Partners, L.P.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | According to a filing on Schedule 13D with the SEC dated February 10, 2005: (A) Ingalls & Snyder, LLC reported to have beneficial ownership consisting of sole
voting power with respect to no shares of
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



72



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| | convertible preferred stock, shared voting power with respect to 903,392 shares of convertible preferred stock, sole dispositive power with respect to no
shares of convertible preferred stock, and shared dispositive power with respect to 2,031,592 shares of convertible preferred stock; (B) Ingalls & Snyder Value Partners, L.P. reported to have beneficial ownership consisting of sole voting power
with respect to no shares of convertible preferred stock, shared voting power with respect to 903,392 shares of convertible preferred stock, sole dispositive power with respect to no shares of convertible preferred stock, and shared dispositive
power with respect to 903,392 shares of convertible preferred stock; (C) Thomas O. Boucher, Jr., the Companys Chairman of the Board, reported to have beneficial ownership consisting of sole voting power with respect to 8,839 shares of
convertible preferred stock, shared voting power with respect to 903,392 shares of convertible preferred stock, sole dispositive power with respect to 8,839 shares of convertible preferred stock, and shared dispositive power with respect to 903,392
shares of convertible preferred stock; (D) Robert L. Gipson reported to have beneficial ownership consisting of sole voting power with respect to 35,365 shares of convertible preferred stock, shared voting power with respect to 903,392 shares of
convertible preferred stock, sole dispositive power with respect to 35,365 shares of convertible preferred stock, and shared dispositive power with respect to 903,392 shares of convertible preferred stock; and (E) Steven M. Foote reported to
have beneficial ownership consisting of sole voting power with respect to no shares of convertible preferred stock, shared voting power with respect to no shares of convertible preferred stock, sole dispositive power with respect to no shares of
convertible preferred stock, and shared dispositive power with respect to 608,518 shares of convertible preferred stock.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

According to a filing on Schedule 13D with the SEC dated February 10, 2005, taking into consideration the Schedule 13D mentioned above in this footnote 6: (A) Ingalls & Snyder, LLC reported to have beneficial
ownership consisting of sole voting power with respect to no shares of common stock, shared voting power with respect to 254,784 shares of common stock, sole dispositive power with respect to no shares of common stock, and shared dispositive power
with respect to 636,306 shares of common stock; (B) Ingalls & Snyder Value Partners, L.P. reported to have beneficial ownership consisting of sole voting power with respect to no shares of common stock, shared voting power with respect to
254,784 shares of common stock, sole dispositive power with respect to no shares of common stock, and shared dispositive power with respect to 254,784 shares of common stock; (C) Thomas O. Boucher, Jr., the Companys Chairman of the Board,
reported to have beneficial ownership consisting of sole voting power with respect to 293 shares of common stock, shared voting power with respect to 254,784 shares of common stock, sole dispositive power with respect to 293 shares of common stock,
and shared dispositive power with respect to 385,924 shares of common stock;

(D) Robert L. Gipson reported to have
beneficial ownership consisting of sole voting power with respect to 75,000 shares of common stock, shared voting power with respect to 254,784 shares of common stock, sole dispositive power with respect to 75,000 shares of common stock, and shared
dispositive power with respect to 254,784 shares of common stock; (E) Adam D. Janovic reported to have beneficial ownership consisting of sole voting power with respect to 16,393 shares of common stock and convertible preferred stock (combined),
shared voting power with respect to no shares of common stock and convertible preferred stock (combined), sole dispositive power with respect to 16,393 shares of common stock and convertible preferred stock (combined), and shared dispositive power
with respect to 459,746 shares of common stock and convertible preferred stock (combined); and (F) Steven M. Foote reported to have beneficial ownership consisting of sole voting power with respect to no shares of common stock, shared voting power
with respect to no shares of common stock, sole dispositive power with respect to no shares of common stock, and shared dispositive power with respect to 219,065 shares of common stock.

Messrs. Boucher and Gipson are the general partners of Ingalls & Snyder Value Partners, L.P., and Mr. Boucher is a Managing Director
of Ingalls & Snyder, LLC. Mr. Foote is a Senior Director of Ingalls & Snyder, LLC, and Mr. Janovic is a Director of Ingalls & Snyder LLC. The principal business of Ingalls & Snyder, LLC is acting as a broker/dealer and investment
advisor. The principal business of Ingalls & Snyder Value Partners, L.P. is acting as a private investment partnership. As of the close of business on January 31, 2005, Ingalls & Snyder, LLC may be deemed to beneficially own 2,667,898 shares
of common stock and convertible preferred stock (combined), consisting of 1,158,176 shares of common stock and convertible preferred stock (combined) as to which Ingalls & Snyder, LLC shares voting and dispositive power with



73



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Ingalls & Snyder Value Partners, L.P. and Messrs. Boucher and Gipson, and 1,509,722 shares of common stock and convertible preferred stock (combined) as
to which Ingalls & Snyder, LLC shares dispositive power with holders of certain of its brokerage accounts and Messrs. Foote, Janovic, H. Shepard Boone, Thomas P. DiTosto, John J. Dougherty and Christopher R. Siege. Shares of common stock and
convertible preferred stock (combined) reported as beneficially owned by Ingalls & Snyder, LLC include the shares of common stock and convertible preferred stock (combined) owned by Ingalls & Snyder Value Partners, L.P., an investment
partnership managed by Ingalls & Snyder, LLC under an investment advisory contract. Shares of common stock and convertible preferred stock (combined) reported under shared dispositive power by Ingalls & Snyder, LLC include shares of common
stock and convertible preferred stock (combined) held in Ingalls & Snyder, LLCs brokerage accounts over which Messrs. Foote, Janovic, Boone, DiTosto, Dougherty and Siege hold discretionary investment authority. Messrs. Boucher and Gipson
disclaim ownership of the securities held by Ingalls & Snyder Value Partners, L.P. and reported pursuant to the Schedule 13D filings described in this footnote in excess of their respective economic interests in Ingalls & Snyder Value
Partners, L.P.

|(7) |  | According to a filing on Schedule 13G with the SEC dated February 10, 2005: (A) Pacholder Associates, Inc. (Pacholder Associates) and Banc One High Yield Partners, LLC
each report to have beneficial ownership consisting of sole voting power with respect to no shares of common stock or convertible preferred stock, shared voting power with respect to 219,380 shares of common stock and 648,804 shares of convertible
preferred stock, sole dispositive power with respect to no shares of common stock or convertible preferred stock, and shared dispositive power with respect to 219,380 shares of common stock and 648,804 shares of convertible preferred stock; and (B)
One Group High Yield Bond Fund reports to have beneficial ownership consisting of sole voting power with respect to no shares of common stock or convertible preferred stock, shared voting power with respect to 124,464 shares of common stock and
380,154 shares of convertible preferred stock, sole dispositive power with respect to no shares of common stock or convertible preferred stock, and shared dispositive power with respect to 124,464 shares of common stock and 380,154 shares of
convertible preferred stock.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pacholder Associates is a registered investment adviser. Pacholder Associates
has two affiliated registered investment advisors that are joint ventures, Pacholder & Company LLC, which is owned 49% percent by Banc One Investment Advisors Corporation (BOIA) and 51% by Pacholder Associates, and Banc One High
Yield Partners, LLC, which is owned 51% by BOIA and 49% by Pacholder Associates. The 219,380 shares of common stock and the 648,804 shares of convertible preferred stock reported for Pacholder Associates are held directly as follows: One Group High
Yield Bond Fund owns 124,464 shares of common stock and 380,154 shares of convertible preferred stock; Pacholder High Yield Fund, Inc. owns 65,893 shares of common stock and 189,370 shares of convertible preferred stock; One Group Income Bond Fund
owns 14,643 shares of common stock and 40,000 shares of convertible preferred stock; Southern UTE Permanent Fund owns 7,058 shares of common stock and 19,280 shares of convertible preferred stock; Legacy Aggressive High Yield Fund owns 4,393 shares
of common stock and 12,000 shares of convertible preferred stock; and WCI Steel, Inc. Defined Pension Benefit Plan owns 2,929 shares of common stock and 8,000 shares of convertible preferred stock.

By virtue of investment advisory agreements between Pacholder Associates and its affiliated investment advisory firms, including Banc One
High Yield Partners, LLC and Pacholder & Company LLC, and certain investment advisory clients, including One Group High Yield Bond Fund, Pacholder High Yield Fund, Inc., One Group Income Bond Fund, Southern UTE Permanent Fund, Legacy Aggressive
High Yield Fund, and WCI Steel, Inc. Defined Pension Benefit Plan (collectively, the Pacholder Entities), (x) Pacholder Associates and Banc One High Yield Partners, LLC may be deemed to share beneficial ownership of the 219,380 shares of
common stock and the 648,804 shares of convertible preferred stock owned by the Pacholder Entities, and (y) Pacholder & Company LLC is deemed to share beneficial ownership of the 65,893 shares of common stock and 189,370 shares of convertible
preferred stock owned by Pacholder High Yield Fund, Inc. Each of Pacholder Associates, Banc One High Yield Partners, LLC, and Pacholder & Company LLC expressly disclaims beneficial ownership of such common stock except to the extent of its
respective pecuniary interest in the common stock.



74



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|(8) |  | According to a filing on Schedule 13G with the SEC dated February 15, 2005, Tontine Capital Partners, L.P., Tontine Capital Management, L.L.C., and Jeffrey L. Gendell each report to
have beneficial ownership consisting of sole voting power with respect to no shares of common stock or convertible preferred stock, shared voting power with respect to 248,844 shares of common stock and 48,750 shares of convertible preferred stock,
sole dispositive power with respect to no shares of common stock or convertible preferred stock, and shared dispositive power with respect to 248,844 shares of common stock and 48,750 shares of convertible preferred stock. Tontine Capital
Management, L.L.C. is the general partner of Tontine Capital Partners, L.P. Jeffrey L. Gendell is the Managing Member of Tontine Capital Management, L.L.C.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | According to a filing on Schedule 13G with the SEC dated February 14, 2005, Recon Arbitrage Master Fund, Ltd., Recon Capital, LLC and Robert L. Friend each report to have beneficial
ownership consisting of sole voting power with respect to no shares of common stock, shared voting power with respect to 273,214 shares of common stock, sole dispositive power with respect to no shares of common stock, and shared dispositive power
with respect to 273,214 shares of common stock. Recon Capital, LLC is the investment adviser to Recon Arbitrage Master Fund, Ltd. and Robert L. Friend is Manager and Senior Managing Director of Recon Capital, LLC.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) |  | According to a filing on Schedule 13G with the SEC dated February 11, 2005, Fairfield Greenwich Limited reports to have beneficial ownership consisting of sole voting power with
respect to 200,000 shares of common stock, shared voting power with respect to no shares of common stock, sole dispositive power with respect to 200,000 shares of common stock, and shared dispositive power with respect to no shares of common stock.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) |  | Ingalls & Snyder Value Partners, L.P. has indicated that it intends to sell the following shares of convertible preferred stock at a price of $10 per share to the following
Directors or their affiliates: Mr. OBrien7,500 shares for $75,000; Mr. Davis15,000 shares for $150,000; Mr. Kanner15,000 shares for $150,000; Mr. Bloomquist10,000 shares for $100,000; and Mr. Goddard (or his
affiliate, The Parkland Group, Inc.)2,500 shares for $25,000.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equity Compensation Plan Information



|                                                               |  |                                                                            |  |                                                          |       |                                                                                                                                           |        
|-------------------------------------------------------------- |  | -------------------------------------------------------------------------- |  | -------------------------------------------------------- | ----- | ----------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                                  |  | Number of securities to beissued upon exercise of outstanding options, (2) |  | Weighted-average exerciseprice of outstandingoptions (3) |       | Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected
incolumn (a)) (4)
|                                                               |  | (a)                                                                        |  | (b)                                                      |       | (c)                                                                                                                                      
|Equity compensation plans approved by security holders         |  | 814,874                                                                    |  | $                                                        | 24.67 |                                                                                                                                           | 293,858
|Equity compensation plans not approved by security holders (1) |  | 1,500                                                                      |  |                                                          | 37.00 |                                                                                                                                           |        
|Total                                                          |  | 816,374                                                                    |  |                                                          | 24.74 |                                                                                                                                           | 293,858

---

|(1) |  | The options for old common stock were granted on June 11, 1998, upon a former employees employment with the Company.
|--- |  | ---------------------------------------------------------------------------------------------------------------------

|(2) |  | The options for old common stock vested 25% each year commencing on the first anniversary of the grant date. The options for old common stock also vested if the employee retired and
was otherwise entitled to a normal, early or shutdown pension under the Companys Pension Plan. In that event, the retired employee could exercise the options for old common stock within two years from the date of retirement, but not beyond the
option expiration date.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Calculated as the weighted-average of the exercise prices for each individual grant under all equity compensation plans of the Company.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Calculated as total options for old common stock authorized by the stockholders or the Company, less options for the old common stock issued, exercised, lapsed and forfeited.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



75



---

The above table provides information as of December 31, 2004 for the old common stock that could have
been issued upon the exercise of options granted under the Predecessor Companys existing equity compensation plans and arrangements. Pursuant to the Plan, all options of the Company for old common stock outstanding prior to the Effective Date
of the Plan were cancelled as of January 31, 2005. On January 31, 2005, all of the Companys old common stock was cancelled.



As of the Effective Date of the Plan, and pursuant to the Plan, record holders of shares of old common stock with allowed interests under the Plan
received warrants, exercisable until March 2, 2005, to purchase up to an aggregate of 576,256 shares of new common stock at an exercise price of $10 per share. Pursuant to the warrant offering, the Company issued an aggregate of 404,071 shares of
new common stock at $10 per share for a total purchase price of $4.041 million.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------



Chartered Aircraft



The Company periodically needs to charter a small aircraft for the purposes of traveling to and from its remote locations. Mr. Lundin, President and Chief
Executive Officer of the Company, and his wife are the shareholders of a company known as L.L. Aviation, LLC, which owns such an aircraft. The Company chartered the aircraft owned by L.L. Aviation, LLC during 2004. A total of approximately $135,000
was paid by the Company for such charters in 2004.



Michigan Limestone
Operations



In the second quarter of 2000, the Company
acquired, pursuant to the interest purchase agreement, all of the partnership interests in Michigan Limestone Operations Limited Partnership (MLO) from its prior owners for $53 million in cash at closing, and the assumption of about $8
million in debt, plus additional contingent payments subject to the achievement of performance parameters over several subsequent years. The purchase price for MLO was arrived at through arms-length negotiations between the parties. On April 26,
2000, Mr. Lundin, one of the former owners of MLO, became one of the Companys executive officers. Mr. Lundins share of the MLO purchase price paid at closing was about $9.8 million, of which he received about $4.9 million after paying
loans and expenses related to the transaction. Additionally, as part of the transaction, Mr. Lundin was originally scheduled to receive a share of contingent payments to the extent earned through 2011. Under the terms of the interest purchase
agreement, upon a change in control, including bankruptcy, of the Company, the former owners of MLO had the right to accelerate the remaining payments.



After the bankruptcy petition date, the creditors committee entered into negotiations with certain of the holders of the MLO claims regarding
possibly amending the interest purchase agreement. Mr. Lundin had no involvement with these negotiations. The Cary Mining Company, Inc., one of the holders of MLO claims, was a member of the creditors committee, but took no part in, and was
excluded from any involvement in, all of the negotiations and discussions of the creditors committee regarding the MLO claims. As a result of these negotiations, the interest purchase agreement was amended as of January 31, 2005, and as of
January 31, 2005 was assumed (as amended) by the Company. Specifically, pursuant to the amended interest purchase agreement, the parties agreed to reduce significantly the aggregate annual amount of contingent payments and to extend the time period
within which the contingent payments are to be made by four to six years. The amended interest purchase agreement provides for maximum aggregate amounts of annual contingent payments in the period 2003 through 2016 as follows:



| |  |  | $625,000 for 2003 (which was paid on January 31, 2005);
| | - |  | -------------------------------------------------------



| |  |  | $1.025 million for the period 2004-2006; and
| | - |  | --------------------------------------------



| |  |  | $2.65 million for the period 2007-2016.
| | - |  | ---------------------------------------



76



---

In addition, the amended interest purchase agreement provides that:



| |  |  | EBITDA payments are determined based upon the Companys consolidated EBITDA and all of the Companys subsidiaries rather than the aggregate EBITDA of the purchased
quarries and/or the purchased operations, beginning with the Companys 2004 fiscal year;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys domestic subsidiaries execute and deliver guaranty agreements as adequate assurance of future performance within the meaning of the Bankruptcy Code;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of MLO claims waive any right, upon assumption and assignment to the Company of the amended interest purchase agreement, to any cure amounts or adequate assurance of
future performance within the meaning of the Bankruptcy Code, other than as provided in the amended interest purchase agreement; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of MLO claims consent to any change in control resulting from the Companys emergence from Chapter 11 and waive any rights that they have (or might have had) to
demand accelerated contingent payments as a result of the commencement or pendency of the Companys Chapter 11 cases or the Companys emergence from Chapter 11.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Mr. Lundin did not receive any contingent payment in 2004, but received a payment of $112,525 on the Effective Date of the
Plan. On November 1, 2001, Mr. Lundin was promoted to the position of the Companys President and Chief Operating Officer, and on December 12, 2001, Mr. Lundin was elected to the Companys Board of Directors. On December 4, 2002, Mr.
Lundin was appointed as the Companys Chief Executive Officer and President.



Mr. Lundin was not an executive officer of the Company prior to the MLO acquisition.



Global Stone Filler Products



The Company has an agreement with the prior owner of Global Stone Filler Products allowing him the right to free and/or below market value stone from the
location in Chatsworth, Georgia. This prior owner is the brother-in-law of the current plant manager at the Global Stone Filler Products location.



Commitment Agreement



As previously described, the Company entered into a commitment agreement with the subscribers prior to the Effective Date of the Plan. Under the terms of
the commitment agreement, each of the holders of Senior Subordinated Notes party to the commitment agreement severally agreed to purchase its ratable share of 8,000,000 shares of the convertible preferred stock, and certain of such holders, along
with certain third party accredited investors party to the commitment agreement, severally agreed to purchase specified amounts of shares of the convertible preferred stock that were not subscribed for in the rights offering, all subject to the
satisfaction or waiver of certain conditions contained in the commitment agreement. On June 29, 2004, the Company entered into an amendment to the commitment agreement under which certain of the parties to the commitment agreement agreed to purchase
an aggregate of 500,000 additional shares of convertible preferred stock at $10 per share for a total purchase price of $5 million, subject to the satisfaction or waiver of the conditions set forth in the commitment agreement. The additional 500,000
shares were allocated among such holders of Senior Subordinated Notes and these other third party accredited investors in proportion to their respective standby commitments under the commitment agreement in respect of the rights offering.



One of the Companys Directors, Mr. Thomas O. Boucher
Jr., was a holder of approximately $10,000 in principal amount of the Senior Subordinated Notes and was a party to the commitment agreement. Under the terms of the commitment agreement, Mr. Boucher purchased 8,839 shares of convertible preferred
stock for a total purchase price of $88,390. In consideration for his total commitment of $597,423, Mr. Boucher received a fee, paid in cash on January 31, 2005, which was the Effective Date of the Plan, of $29,631.



77



---

Mr. Boucher was a member and the chair of the unsecured creditors committee. Mr. Boucher is also a
general partner of Ingalls & Snyder Value Partners, L.P., which was a holder of approximately $8.7 million in principal amount of the Senior Subordinated Notes and was a party to the commitment agreement. Under the terms of the commitment
agreement, Ingalls & Snyder Value Partners, L.P. purchased 903,392 shares of convertible preferred stock for a total price of $9.033 million. In consideration for its total commitment of $20.988 million, Ingalls & Snyder Value Partners, L.P.
received a fee, paid in cash on January 31, 2005, which was the Effective Date of the Plan, of $840,621.



Mr. Boucher is also Managing Director of Ingalls & Snyder LLC, a broker dealer and registered investment advisor of which certain parties to the
commitment agreement are officers or clients.



Registration Rights



As part of the financial restructuring, the Company
entered into a registration rights agreement (the Registration Rights Agreement) on January 31, 2005 with the parties to the commitment agreement granting a demand registration right to enable them to resell, pursuant to an effective
registration statement filed with the SEC, the total of 3,360,800 shares of convertible preferred stock purchased pursuant to the commitment agreement, and the 3,360,800 shares of common stock issuable upon conversion of the convertible preferred
stock. The Company filed a registration statement covering such securities on Form S-1 with the SEC on January 27, 2005. The Company is required to keep such registration statement effective until the earliest of (1) two years after the effective
date of that registration statement, (2) the date when all of the shares covered by the registration statement have been sold pursuant to the registration statement and (3) the date on which the shares covered by the registration statement may be
resold by such holders pursuant to Rule 144(k) of the Securities Act of 1933. The registration right is subject to various customary conditions as set forth in the Registration Rights Agreement, which you should read in its entirety for the complete
provisions. The Company will pay all fees and expenses related to the registration of such shares pursuant to the registration statement (excluding those of counsel or other advisors to the selling shareholders and any underwriting discounts and
fees and brokerage and sales commissions, which will be paid by the selling shareholders). Under the Registration Rights Agreement, if such registration statement has not been declared effective by the SEC on or before the 90th day after the
Effective Date of the Plan (a registration default), the Company has agreed to pay liquidated damages to each holder of a share of convertible preferred stock purchased pursuant to the commitment agreement for each day that the
registration default continues at the annual rate of $0.30 per share.



Each of the signatories to the Registration Rights Agreement excluding Fledgling Associates LLC, Gator Investment Company, Robert L. Gipson IRA, Thomas L. Gipson IRA, J George Investments LLC, Nikolaos Monoyios IRA, Robert T. Clutterbuck
Trust, Brad Shingleton, John Stein, Steven N. Stein and Stifel Nicolaus & Company, Incorporated were holders of the Companys Senior Subordinated Notes immediately prior to its emergence from bankruptcy on January 31, 2005.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



Fees paid or accrued by the Company for audit and other services provided by Ernst & Young LLP for the years ended December 31, 2003 and 2004 were:



Audit Fees



Fees for the audit of the Companys financial statements for 2004 and
2003, the related reviews of the financial statements included in the Companys Form 10-Qs and audit fees for SEC filings for 2004 and 2003 totaled $642,580 and $440,369, respectively.



Audit-Related Fees



Fees and expenses for assurance and related services, including employee benefit plan audits, accounting consultations and
consultation concerning financial accounting and reporting standards, aggregate to $20,026 in 2004 and $60,900 in 2003. All audit-related fees were pre-approved in 2003 and 2004.



78



---

Tax Fees



Fees and expenses for tax compliance, tax planning, and tax advice on various federal, state and local matters aggregate to $1,064 in 2004 and $2,100 in
2003. All tax fees were pre-approved in 2003 and 2004.



All Other Fees



Fees and expenses for all other services, which consisted
of use of an online accounting tool, aggregate to $2,500 in each of 2004 and 2003. All other fees were pre-approved in 2003 and 2004.



Pre-Approval Policies and Procedures



The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax services and other services performed by the
independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must
approve the permitted service before the independent auditor is engaged to perform it. The Audit Committee has delegated to the Chair of the Audit Committee authority to approve permitted services provided that the Chair reports any decisions to the
Committee at its next scheduled meeting.



The provision of
these services by the independent auditors in 2004 was compatible with maintaining the auditors independence.



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



(a)(1) List of Financial Statements:The following consolidated financial statements of Oglebay Norton Company and its subsidiaries are included in
Item 8:



|                                                                                            |  | 
|------------------------------------------------------------------------------------------- |  | 
|Report of Ernst & Young LLP, Independent Registered Public Accounting Firm                  |  | 
|                                                                                            | 
|Consolidated Statement of OperationsYears Ended December 31, 2004, 2003 and 2002           |  | 
|                                                                                            | 
|Consolidated Balance SheetDecember 31, 2004 and 2003                                       |  | 
|                                                                                            | 
|Consolidated Statement of Cash FlowsYears Ended December 31, 2004, 2003 and 2002           |  | 
|                                                                                            | 
|Consolidated Statement of Stockholders EquityYears Ended December 31, 2004, 2003 and 2002 |  | 
|                                                                                            | 
|Notes to Consolidated Financial StatementsDecember 31, 2004, 2003 and 2002                 |  | 



(a)(2) and (c)
Financial Statement Schedules:No consolidated financial statement schedules are presented because the schedules are not required, the information is not present or not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the financial statements and related notes.



(a)(3) and (b) Exhibit Index:The response to this portion of Item 14 is submitted in a separate section of this Annual Report on Form 10-K at pages I-1 through I-6.



79



---

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report to be signed
on its behalf by the undersigned thereunto duly authorized.



OGLEBAY NORTON COMPANYBy:

/s/    Michael D. LundinPresident and Chief Executive Officer March 30, 2005By:

/s/    Julie A. BolandVice President and Chief Financial Officer March 30, 2005




Pursuant to the
requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.



|                                          |  |                                                                                        |  |               
|----------------------------------------- |  | -------------------------------------------------------------------------------------- |  | --------------
|                                          |  |                                                                                       
|/s/    Michael D. LundinMichael D. Lundin |  | President and Chief Executive Officer; Principal Executive Officer; Director           |  | March 30, 2005
|                                          |  |                                                                                       
|/s/    Julie A. BolandJulie A. Boland     |  | Vice President and Chief Financial Officer; Principal Financial and Accounting Officer |  | March 30, 2005
|                                          |  |                                                                                       
|*DeLyle W. Bloomquist                     |  | Director                                                                               |  | March 30, 2005
|                                          |  |                                                                                       
|*Thomas O. Boucher, Jr.                   |  | Director                                                                               |  | March 30, 2005
|                                          |  |                                                                                       
|*Eugene I. Davis                          |  | Director                                                                               |  | March 30, 2005
|                                          |  |                                                                                       
|*Laurence V. Goddard                      |  | Director                                                                               |  | March 30, 2005
|                                          |  |                                                                                       
|*Robert H. Kanner                         |  | Director                                                                               |  | March 30, 2005
|                                          |  |                                                                                       
|*John P. OBrien                          |  | Director                                                                               |  | March 30, 2005



|* |  | The undersigned, by signing her name hereto, does sign and execute this Annual Report pursuant to the powers of attorney executed by the above-named Directors of Registrant, which
are filed herewith as Exhibit 24.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



By:

/s/    Rochelle F. WalkRochelle F. Walk Vice President, General Counsel and Secretary






80



---

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



BOARD OF DIRECTORS

OGLEBAY NORTON COMPANY



We have audited the accompanying consolidated balance sheet of Oglebay Norton Company and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of operations, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Oglebay Norton Company and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles.



As more fully described in Note A to the consolidated financial statements, effective January 31, 2005 the Company emerged from Bankruptcy pursuant to a plan of reorganization confirmed by the Bankruptcy Court on November 17, 2004. In
accordance with American Institute of Certified Public Accountants Statement of Position No. 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, the Company has adopted fresh start reporting
whereby its assets, liabilities and new capital structure have been adjusted to reflect estimated fair values as of December 31, 2004. As a result, the consolidated balance sheet and statement of shareholders equity at December 31, 2004
reflect this basis of reporting and are not comparable to the Companys pre-reorganization consolidated balance sheet and statement of shareholders equity.



As discussed in Note B to the consolidated financial statements, in 2003 the Company changed its method of accounting for
asset retirement obligations.



/S/    ERNST & YOUNG LLP



Cleveland, Ohio

March 25, 2005



F-1



---

Part I. Item 1. FINANCIAL INFORMATION



OGLEBAY NORTON COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENT OF OPERATIONS



(In
thousands, except share amounts)



|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------- | -------- | - | ---------------------- | - | ------- | ---------------------- |  | - | ------- | -
|                                                                                                      |  | Year Ended December 31 |         
|                                                                                                      |  | PredecessorCompany2004 |          |   | PredecessorCompany2003 |   |         | PredecessorCompany2002 | 
|NET SALES AND OPERATING REVENUES                                                                      |  | $                      | 435,650  |   |                        | $ | 404,229 |                        |  | $ | 400,572 |  
|                                                                                                      |  |                        |         
|COSTS AND EXPENSES                                                                                    |  |                        |          |   |                        |   |         |                        |  |   |         |  
|Cost of goods sold and operating expenses                                                             |  |                        | 334,223  |   |                        |   | 315,244 |                        |  |   | 294,647 |  
|Depreciation, depletion, amortization and accretion                                                   |  |                        | 36,246   |   |                        |   | 37,777  |                        |  |   | 33,665  |  
|General, administrative and selling expenses                                                          |  |                        | 38,637   |   |                        |   | 42,302  |                        |  |   | 37,145  |  
|(Recovery of) provision for doubtful accounts                                                         |  |                        | (651     | ) |                        |   | 2,332   |                        |  |   | 527     |  
|Provision for restructuring, asset impairments and early retirement programs                          |  |                        | 7,446    |   |                        |   | 13,221  |                        |  |   | (37     | )
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|                                                                                                      |  |                        | 415,901  |   |                        |   | 410,876 |                        |  |   | 365,947 |  
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|OPERATING INCOME (LOSS)                                                                               |  |                        | 19,749   |   |                        |   | (6,647  | )                      |  |   | 34,625  |  
|                                                                                                      |  |                        |         
|Reorganization items, net                                                                             |  |                        | (78,192  | ) |                        |   |        |                        |  |   |        |  
|Gain (loss) on disposition of assets                                                                  |  |                        | 7        |   |                        |   | (3,686  | )                      |  |   | 55      |  
|Interest expense                                                                                      |  |                        | (54,588  | ) |                        |   | (53,843 | )                      |  |   | (43,595 | )
|Other income (expense), net                                                                           |  |                        | 5,941    |   |                        |   | 2,032   |                        |  |   | (4,121  | )
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE                                   |  |                        | (107,083 | ) |                        |   | (62,144 | )                      |  |   | (13,036 | )
|INCOME TAX BENEFIT                                                                                    |  |                        | (1,008   | ) |                        |   | (30,343 | )                      |  |   | (6,428  | )
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                                                    |  |                        | (106,075 | ) |                        |   | (31,801 | )                      |  |   | (6,608  | )
|CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR ASSET RETIREMENT OBLIGATIONS (net of tax benefit of $889)  |  |                        |         |   |                        |   | (1,391  | )                      |  |   |        |  
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|NET LOSS                                                                                              |  | $                      | (106,075 | ) |                        | $ | (33,192 | )                      |  | $ | (6,608  | )
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|PER SHARE AMOUNTSBASIC AND ASSUMING DILUTION:                                                        |  |                        |          |   |                        |   |         |                        |  |   |         |  
|Loss before cumulative effect of accounting change                                                    |  | $                      | (20.27   | ) |                        | $ | (6.21   | )                      |  | $ | (1.32   | )
|Cumulative effect of accounting change for asset retirement obligations (net of tax benefit of $0.18) |  |                        |         |   |                        |   | (0.27   | )                      |  |   |        |  
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  
|Net loss per sharebasic and assuming dilution                                                        |  | $                      | (20.27   | ) |                        | $ | (6.48   | )                      |  | $ | (1.32   | )
|                                                                                                      |  |                        |          |   |                        |   |         |                        |  |   |         |  



See
notes to consolidated financial statements.



F-2



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEET



(Dollars and
shares in thousands, except per share amounts)



|                                                                                                      |  |                        |         |                        |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---------------------- | - | ------- | -
|                                                                                                      |  | December 31            |        
|                                                                                                      |  | ReorganizedCompany2004 |         | PredecessorCompany2003 |  
|ASSETS                                                                                                |  |                        |         |                        |   |         |  
|CURRENT ASSETS                                                                                        |  |                        |         |                        |   |         |  
|Cash and cash equivalents                                                                             |  | $                      | 17,694  |                        | $ | 1,137   |  
|Accounts receivable (net of reserve for doubtful accounts)                                            |  |                        |         |                        |   |         |  
|($2,036 for Reorganized Company in 2004, $5,842 for Predecessor Company in 2003)                      |  |                        | 62,448  |                        |   | 50,422  |  
|Receivable from Issuable Preferred Stock                                                              |  |                        | 84,591  |                        |   |        |  
|Inventories:                                                                                          |  |                        |         |                        |   |         |  
|Raw materials and finished products                                                                   |  |                        | 34,592  |                        |   | 35,236  |  
|Operating supplies                                                                                    |  |                        | 12,816  |                        |   | 12,795  |  
|                                                                                                      |  |                        |         |                        |   |         |  
|                                                                                                      |  |                        | 47,408  |                        |   | 48,031  |  
|Deferred income taxes                                                                                 |  |                        | 3,719   |                        |   | 3,901   |  
|Other current assets                                                                                  |  |                        | 13,696  |                        |   | 10,915  |  
|                                                                                                      |  |                        |         |                        |   |         |  
|TOTAL CURRENT ASSETS                                                                                  |  |                        | 229,556 |                        |   | 114,406 |  
|PROPERTY AND EQUIPMENT                                                                                |  |                        |         |                        |   |         |  
|Land, land reclamation and improvements                                                               |  |                        | 30,609  |                        |   | 41,111  |  
|Mineral reserves                                                                                      |  |                        | 214,963 |                        |   | 153,362 |  
|Buildings and improvements                                                                            |  |                        | 15,720  |                        |   | 42,183  |  
|Machinery and equipment                                                                               |  |                        | 177,975 |                        |   | 509,984 |  
|                                                                                                      |  |                        |         |                        |   |         |  
|                                                                                                      |  |                        | 439,267 |                        |   | 746,640 |  
|Less allowances for depreciation, depletion and amortization                                          |  |                        |        |                        |   | 332,447 |  
|                                                                                                      |  |                        |         |                        |   |         |  
|                                                                                                      |  |                        | 439,267 |                        |   | 414,193 |  
|GOODWILL (net of accumulated amortization of $11,093 in 2003)                                         |  |                        |        |                        |   | 73,877  |  
|PREPAID PENSION COSTS                                                                                 |  |                        | 2,925   |                        |   | 35,319  |  
|OTHER ASSETS                                                                                          |  |                        | 8,036   |                        |   | 12,036  |  
|                                                                                                      |  |                        |         |                        |   |         |  
|TOTAL ASSETS                                                                                          |  | $                      | 679,784 |                        | $ | 649,831 |  
|                                                                                                      |  |                        |         |                        |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                  |  |                        |         |                        |   |         |  
|CURRENT LIABILITIES                                                                                   |  |                        |         |                        |   |         |  
|Current portion of long-term debt                                                                     |  | $                      | 342,166 |                        | $ | 420,350 |  
|Accounts payable                                                                                      |  |                        | 47,461  |                        |   | 27,207  |  
|Payrolls and other accrued compensation                                                               |  |                        | 13,616  |                        |   | 4,857   |  
|Accrued expenses                                                                                      |  |                        | 25,177  |                        |   | 14,906  |  
|Accrued interest expense                                                                              |  |                        | 12,165  |                        |   | 8,392   |  
|Income taxes payable                                                                                  |  |                        | 402     |                        |   | 480     |  
|                                                                                                      |  |                        |         |                        |   |         |  
|TOTAL CURRENT LIABILITIES                                                                             |  |                        | 440,987 |                        |   | 476,192 |  
|LONG-TERM DEBT, less current portion                                                                  |  |                        | 11,027  |                        |   | 1,490   |  
|POSTRETIREMENT BENEFITS OBLIGATION                                                                    |  |                        | 62,176  |                        |   | 50,049  |  
|OTHER LONG-TERM LIABILITIES                                                                           |  |                        | 49,674  |                        |   | 29,500  |  
|DEFERRED INCOME TAXES                                                                                 |  |                        | 5,910   |                        |   | 4,596   |  
|STOCKHOLDERS EQUITY                                                                                  |  |                        |         |                        |   |         |  
|Issuable Reorganized Company Preferred Stock, par value $.01authorized 30,000; issuable 8,500 shares |  |                        | 85      |                        |   |        |  
|Issuable Reorganized Company Additional CapitalPreferred Stock                                       |  |                        | 84,915  |                        |   |        |  
|Issuable Reorganized Company Common Stock, par value $.01authorized 90,000; issuable 3,165 shares    |  |                        | 29      |                        |   |        |  
|Issuable Reorganized Company Additional CapitalCommon Stock                                          |  |                        | 24,981  |                        |   |        |  
|Predecessor Company Common Stock, par value $1.00authorized 30,000; issued 7,253 shares              |  |                        |        |                        |   | 7,253   |  
|Predecessor Company Additional Capital                                                                |  |                        |        |                        |   | 9,312   |  
|Predecessor Company Retained Earnings                                                                 |  |                        |        |                        |   | 106,075 |  
|Predecessor Company Accumulated Other Comprehensive Loss                                              |  |                        |        |                        |   | (4,542  | )
|                                                                                                      |  |                        |         |                        |   |         |  
|                                                                                                      |  |                        | 110,010 |                        |   | 118,098 |  
|Predecessor Company Treasury Stock, at cost2,193 shares                                              |  |                        |        |                        |   | (30,094 | )
|                                                                                                      |  |                        |         |                        |   |         |  
|                                                                                                      |  |                        | 110,010 |                        |   | 88,004  |  
|                                                                                                      |  |                        |         |                        |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                            |  | $                      | 679,784 |                        | $ | 649,831 |  
|                                                                                                      |  |                        |         |                        |   |         |  



See notes to consolidated financial
statements.



F-3



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENT OF CASH FLOWS



(In
thousands)



|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------ |  | ---------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                           |  | Year Ended December 31 |         
|                                                                                           |  | 2004                   |          |   | 2003 |   |          | 2002 | 
|OPERATING ACTIVITIES                                                                       |  |                        |          |   |      |   |          |      |  |   |          |  
|Net loss                                                                                   |  | $                      | (106,075 | ) |      | $ | (33,192  | )    |  | $ | (6,608   | )
|Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |  |                        |          |   |      |   |          |      |  |   |          |  
|Cumulative effect of accounting change for asset retirement obligations, net of taxes      |  |                        |         |   |      |   | 1,391    |      |  |   |         |  
|Depreciation, depletion, amortization and accretion                                        |  |                        | 36,246   |   |      |   | 37,777   |      |  |   | 33,665   |  
|Deferred vessel costs                                                                      |  |                        | (202     | ) |      |   |         |      |  |   |         |  
|Deferred winter maintenance costs                                                          |  |                        | 12       |   |      |   | 214      |      |  |   | (585     | )
|Deferred income taxes                                                                      |  |                        | (1,008   | ) |      |   | (25,011  | )    |  |   | (6,428   | )
|Income tax refunds                                                                         |  |                        | 19       |   |      |   | 3        |      |  |   | 7,855    |  
|Restructuring, asset impairments and early retirement programs                             |  |                        | 7,292    |   |      |   | 12,034   |      |  |   | (2,614   | )
|Provision for doubtful accounts                                                            |  |                        | (651     | ) |      |   | 2,332    |      |  |   | 527      |  
|Non-cash amortization of financing fees                                                    |  |                        | 14,173   |   |      |   | 4,894    |      |  |   | 3,121    |  
|Reorganization items, net                                                                  |  |                        | 78,192   |   |      |   |         |      |  |   |         |  
|(Gain) loss on disposition of assets                                                       |  |                        | (7       | ) |      |   | 3,686    |      |  |   | (55      | )
|Increase in prepaid insurance                                                              |  |                        | (2,028   | ) |      |   | (183     | )    |  |   | (407     | )
|Increase in cash collateral                                                                |  |                        | (2,531   | ) |      |   | (206     | )    |  |   |         |  
|Decrease (increase) in prepaid pension costs                                               |  |                        | 940      |   |      |   | 2,376    |      |  |   | (1,244   | )
|(Increase) decrease in accounts receivable                                                 |  |                        | (11,476  | ) |      |   | 992      |      |  |   | (9,780   | )
|(Increase) decrease in inventories                                                         |  |                        | (44      | ) |      |   | 7,509    |      |  |   | (5,650   | )
|Insurance escrow                                                                           |  |                        | (4,680   | ) |      |   |         |      |  |   |         |  
|Increase (decrease) in accounts payable                                                    |  |                        | 16,042   |   |      |   | (952     | )    |  |   | 4,511    |  
|Increase (decrease) in payrolls and other accrued compensation                             |  |                        | 4,205    |   |      |   | (4,516   | )    |  |   | 2,062    |  
|Increase (decrease) in accrued expenses                                                    |  |                        | 1,560    |   |      |   | (279     | )    |  |   | 2,790    |  
|Increase (decrease) in accrued interest                                                    |  |                        | 9,385    |   |      |   | (1,764   | )    |  |   | (198     | )
|Decrease in income taxes payable                                                           |  |                        | (97      | ) |      |   | (5,407   | )    |  |   | (168     | )
|Increase in postretirement benefits                                                        |  |                        | 3,538    |   |      |   | 2,241    |      |  |   | 2,062    |  
|Other operating activities                                                                 |  |                        | (2,986   | ) |      |   | (3,946   | )    |  |   | (4,319   | )
|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  
|NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES                                       |  |                        | 39,819   |   |      |   | (7       | )    |  |   | 18,537   |  
|NET CASH USED FOR REORGANIZATION ITEMS                                                     |  |                        | (14,750  | ) |      |   |         |      |  |   |         |  
|                                                                                           |  |                        |         
|INVESTING ACTIVITIES                                                                       |  |                        |          |   |      |   |          |      |  |   |          |  
|Capital expenditures                                                                       |  |                        | (23,899  | ) |      |   | (19,165  | )    |  |   | (20,016  | )
|Acquisition of Businesses                                                                  |  |                        |         |   |      |   | (6,831   | )    |  |   |         |  
|Proceeds from the sale of Lawn and Garden                                                  |  |                        |         |   |      |   | 6,871    |      |  |   |         |  
|Proceeds from the sale of Redi-Mix                                                         |  |                        | 1,225    |   |      |   |         |      |  |   |         |  
|Proceeds from the sale of Richard Reiss                                                    |  |                        | 1,800    |   |      |   |         |      |  |   |         |  
|Proceeds from the disposition of assets                                                    |  |                        | 8        |   |      |   | 387      |      |  |   | 2,304    |  
|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  
|NET CASH USED FOR INVESTING ACTIVITIES                                                     |  |                        | (20,866  | ) |      |   | (18,738  | )    |  |   | (17,712  | )
|                                                                                           |  |                        |         
|FINANCING ACTIVITIES                                                                       |  |                        |          |   |      |   |          |      |  |   |          |  
|Repayments on debt                                                                         |  |                        | (709,683 | ) |      |   | (157,114 | )    |  |   | (247,902 | )
|Additional debt                                                                            |  |                        | 735,931  |   |      |   | 179,158  |      |  |   | 254,478  |  
|Financing costs                                                                            |  |                        | (13,894  | ) |      |   | (4,762   | )    |  |   | (8,413   | )
|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  
|NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES                                       |  |                        | 12,354   |   |      |   | 17,282   |      |  |   | (1,837   | )
|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  
|Increase (decrease) in cash and cash equivalents                                           |  |                        | 16,557   |   |      |   | (1,463   | )    |  |   | (1,012   | )
|CASH AND CASH EQUIVALENTS, JANUARY 1                                                       |  |                        | 1,137    |   |      |   | 2,600    |      |  |   | 3,612    |  
|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, DECEMBER 31                                                     |  | $                      | 17,694   |   |      | $ | 1,137    |      |  | $ | 2,600    |  
|                                                                                           |  |                        |          |   |      |   |          |      |  |   |          |  



See notes to consolidated financial
statements.



F-4



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY



(In thousands, except per share amounts)



|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|----------------------------------------------------------- |  | -------------------------------- | -- | ---------------------------------------------- | - | ----------------------------- |  | ------------------------------------------ | -- | ----------------------------- | - | ------ | ----------------------------------- | - | ------ | ---------------------------------- |  | - | --------------------------------------- | - |  | ----------------------------------------- | -------- | - | -------------------------------------------- | - | ------ | ---------------------------------------- |  | - | ------------------------ | - |  | - | --- | - |  | - | ------- | - |  | - | -------- | -
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   | Other Comprehensive Income (Loss)       |   |  |                                           |          |   |                                              |  
|                                                            |  | ReorganizedCompanyPreferredStock |    | Reorganized CompanyAdditionalCapital-Preferred |   | ReorganizedCompanyCommonStock |  | ReorganizedCompanyAdditionalCapital-Common |    | PredecessorCompanyCommonStock |   |        | PredecessorCompanyAdditionalCapital |   |        | PredecessorCompanyRetainedEarnings |  |   | PredecessorCompanyDerivativeInstruments |   |  | PredecessorCompanyMinimumPensionLiability |          |   | PredecessorCompanyForeignCurrencyTranslation |   |        | PredecessorCompanyCommonStock inTreasury |  |   | TotalStockholdersEquity |  
|Balance, January 1, 2002                                    |  | $                                |   |                                                | $ |                              |  | $                                          |   |                               | $ |       |                                     | $ | 7,253  |                                    |  | $ | 9,460                                   |   |  | $                                         | 145,875  |   |                                              | $ | (6,846 | )                                        |  | $ | (1,472                   | ) |  | $ | (61 | ) |  | $ | (31,269 | ) |  | $ | 122,940  |  
|Comprehensive income (loss):                                |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Net loss                                                    |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           | (6,608   | ) |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (6,608   | )
|Derivative instruments:                                     |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Loss on derivatives, net of tax                             |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   | (4,326 | )                                        |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (4,326   | )
|Reclassification adjustments to earnings, net of tax        |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   | 6,122  |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | 6,122    |  
|Foreign currency translation adjustment                     |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   | 61  |   |  |   |         |   |  |   | 61       |  
|Minimum pension liability adjustment, net of tax            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   | (3,011                   | ) |  |   |     |   |  |   |         |   |  |   | (3,011   | )
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                    |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (7,762   | )
|Stock plans                                                 |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   | 267                                     |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   | 56      |   |  |   | 323      |  
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Balance, December 31, 2002                                  |  | $                                |   |                                                | $ |                              |  | $                                          |   |                               | $ |       |                                     | $ | 7,253  |                                    |  | $ | 9,727                                   |   |  | $                                         | 139,267  |   |                                              | $ | (5,050 | )                                        |  | $ | (4,483                   | ) |  | $ |    |   |  | $ | (31,213 | ) |  | $ | 115,501  |  
|Comprehensive income (loss):                                |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Net loss                                                    |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           | (33,192  | ) |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (33,192  | )
|Derivative instruments:                                     |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Gain on derivatives, net of tax                             |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   | 123    |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | 123      |  
|Reclassification adjustments to earnings, net of tax        |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   | 4,158  |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | 4,158    |  
|Minimum pension liability adjustment, net of tax            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   | 710                      |   |  |   |     |   |  |   |         |   |  |   | 710      |  
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                    |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (28,201  | )
|Stock plans                                                 |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   | (415                                    | ) |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   | 1,119   |   |  |   | 704      |  
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Balance, December 31, 2003                                  |  | $                                |   |                                                | $ |                              |  | $                                          |   |                               | $ |       |                                     | $ | 7,253  |                                    |  | $ | 9,312                                   |   |  | $                                         | 106,075  |   |                                              | $ | (769   | )                                        |  | $ | (3,773                   | ) |  | $ |    |   |  | $ | (30,094 | ) |  | $ | 88,004   |  
|Comprehensive income (loss):                                |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Net loss                                                    |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           | (106,075 | ) |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (106,075 | )
|Derivative instruments:                                     |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Gain on derivatives, net of tax                             |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   | 198    |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | 198      |  
|Reclassification adjustments to earnings, net of tax        |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   | 571    |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | 571      |  
|Minimum pension liability adjustment, net of tax            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   | (1,737                   | ) |  |   |     |   |  |   |         |   |  |   | (1,737   | )
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                    |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | (107,043 | )
|Stock plans                                                 |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   | (2,417                                  | ) |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   | 2,457   |   |  |   | 40       |  
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Balance, December 31, 2004 before fresh start reporting     |  | $                                |   |                                                | $ |                              |  | $                                          |   |                               | $ |       |                                     | $ | 7,253  |                                    |  | $ | 6,895                                   |   |  | $                                         |         |   |                                              | $ |       |                                          |  | $ | (5,510                   | ) |  | $ |    |   |  | $ | (27,637 | ) |  | $ | (18,999  | )
|Fair value adjustments in Fresh-Start reporting             |  |                                  |    |                                                |   |                               |  |                                            |   |                               |   |       |                                     |   | (7,253 | )                                  |  |   | (6,895                                  | ) |  |                                           |          |   |                                              |   |       |                                          |  |   | 5,510                    |   |  |   |    |   |  |   | 27,637  |   |  |   | 18,999   |  
|Plan of Reorganization adjustments in Fresh-Start reporting |  |                                  | 85 |                                                |   | 84,915                        |  |                                            | 29 |                               |   | 24,981 |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   | 110,010  |  
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  
|Balance, December 31, 2004                                  |  | $                                | 85 |                                                | $ | 84,915                        |  | $                                          | 29 |                               | $ | 24,981 |                                     | $ |       |                                    |  | $ |                                        |   |  | $                                         |         |   |                                              | $ |       |                                          |  | $ |                         |   |  | $ |    |   |  | $ |        |   |  | $ | 110,010  |  
|                                                            |  |                                  |    |                                                |   |                               |  |                                            |    |                               |   |        |                                     |   |        |                                    |  |   |                                         |   |  |                                           |          |   |                                              |   |        |                                          |  |   |                          |   |  |   |     |   |  |   |         |   |  |   |          |  



See
notes to consolidated financial statements.



F-5



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



December 31, 2004, 2003 and 2002



NOTE AVOLUNTARY PETITIONS UNDER CHAPTER 11 OF U.S. BANKRUPTCY CODE AND SUBSEQUENT EVENTS



Beginning in 1998, the Company incurred significant debt in connection with a series of acquisitions. These acquisitions, which transitioned the Company
into a diversified industrial minerals company, also resulted in a highly-leveraged balance sheet. When the U.S. economy slipped into recession in 2001, the Companys debt became an increasing financial burden. Over the past three years the
Company has been impacted particularly by the decline of the nations integrated steel industry, rising energy costs and adverse market conditions in certain segments of the commercial and residential building materials markets. Together, these
factors resulted in decreased demand for limestone and mica from the quarries and for the services of the Great Lakes fleet. Continuing losses aggravated the Companys already significant debt load.



In spite of implementing restructuring initiatives to remedy the
Companys heavily burdened balance sheet, the Company determined that, due to impending debt obligation defaults, it was necessary to complete the Companys restructuring efforts under the protection of the Bankruptcy Code.



On February 23, 2004, the Company and all of the direct and indirect
wholly-owned subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code to pursue a financial restructuring that would permit the Company to reduce its indebtedness and provide more financial flexibility to
implement its business strategy. The Plan was confirmed by the Bankruptcy Court on November 17, 2004. The Plan became effective and the Company legally emerged from Chapter 11 on January 31, 2005. However, the Company satisfied all material
conditions precedent to the effectiveness of the Plan on December 27, 2004 and, therefore, used December 31, 2004 as the date for adopting Fresh-Start reporting in order to coincide with the Companys normal financial closing for the month of
December. The Plan provided that, among other things:



| |  |  | with the exception of (1) the Companys Senior Subordinated Notes in the aggregate principal amount of $100 million issued pursuant to the Indenture, dated as of February 1,
1999, between the Company as issuer and Norwest Bank Minnesota, National Association n/k/a Wells Fargo Bank MN, National Association, as indenture trustee (which Senior Subordinated Notes were cancelled as of the Effective Date of the Plan) and (2)
claims against the Company under or evidenced by an interest purchase agreement, dated as of April 14, 2000 (the interest purchase agreement), by and among the Company, Johnson Mining Inc., The Cary Mining Company, Inc., Michigan
Minerals Associates, Inc. and Michigan Limestone Operations Limited Partnership, as amended or modified (the MLO claims), all allowed nonpriority pre-petition claims against the Company (A) will be or have been paid in full in cash in
accordance with the Plan, (B) received collateral securing their allowed claims pursuant to the Plan or (C) were reinstated in accordance with the Plan;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | holders of allowed Senior Subordinated Note claims received their pro rata distribution of 2,928,571 shares of common stock in full satisfaction of their claims, which represented
about 25.6% of the total voting power of and equity interests in the Company without giving effect to the conversion of the convertible preferred stock, the exercise of the warrants or the management stock plan;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the interest purchase agreement relating to the MLO claims was amended as set forth in the Plan and, as of the Effective Date, was assumed (as amended) by the Company. The MLO
claims will be paid in accordance with the amended interest purchase agreement;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all of the shares of the old common stock outstanding as of the Effective Date of the Plan and any related options or similar rights were cancelled as of the
Effective Date of the Plan, and record holders
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-6



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



| | of shares of old common stock with allowed interests under the Plan as of the close of business on the warrant distribution record date received warrants,
exercisable until March 2, 2005, to purchase up to 576,256 shares of common stock at an exercise price of $10 per share;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | holders of any intercompany claims did not receive any property under the Plan; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | in general, post-petition claims were reinstated and will be or have been paid by the Company in the ordinary course of business.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



It was a condition to the Plan of Reorganization that the Company raise new
financing. To meet this condition, the Company issued and sold an aggregate of 8,500,000 shares of convertible preferred stock pursuant to the rights offering and the commitment agreement. The Company used the net proceeds from the issuance and sale
of the convertible preferred stock and available cash and borrowings under the post-emergence Credit Facility to redeem the 18% Senior Secured Notes in the principal amount at December 31, 2004 of $84.591 million due October 25, 2008 (Senior
Secured Notes), at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance with the terms of the Senior Secured Notes purchase agreement, dated October 25, 2002.



Pursuant to the rights offering, holders of the Companys Senior
Subordinated Notes claims that were not parties to the commitment agreement purchased an aggregate of 5,139,200 shares of convertible preferred stock at $10 per share for a total purchase price of $51.4 million. Pursuant to the commitment agreement,
the subscribers purchased an aggregate of 3,360,800 shares of convertible preferred stock at $10 per share for a total purchase price of $33.6 million.



The Companys shares were delisted from trading on the NASDAQ National Market effective at the opening of business on March 3, 2004. As of that
date, the Companys shares traded as an Other OTC issue under the symbol OGLEQ. The Company intends to apply to list the convertible preferred stock and the common stock on the NASDAQ National Market as soon as practicable when the Company
meets the listing requirements. Such securities did not qualify for listing at the time they were issued, and the Company cannot guarantee that such securities will ever be listed on the NASDAQ National Market. If the Company is not able to list
such securities on the NASDAQ National Market, the Company intends to cooperate with any registered broker-dealer who may seek to initiate price quotations for the convertible preferred stock and the common stock on the OTC Bulletin Board. Again,
however, no assurance can be made that such securities will be quoted on the OTC Bulletin Board or that an active trading market will exist.



The Company intends to continue to pursue the strategic operating plan it put in place over the last two years but has been unable to execute fully due to
the financial issues it has faced. The strategic operating plan is based on the core competencies of the Company of extracting, processing and providing minerals. The Company plans to expand its current markets and develop new markets for its
limestone and limestone fillers, while maximizing the profitability of its sand, lime and marine segments.



As previously disclosed, management had been in discussions to sell its mica operations.



F-7



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



NOTE BFRESH-START REPORTING AND ACCOUNTING POLICIES



FRESH-START REPORTING



The Companys consolidated financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business.



The Companys emergence from Chapter 11 bankruptcy proceedings resulted in a new reporting entity and the adoption of Fresh-Start reporting in accordance with the American Institute of Certified Public
Accountants (AICPA) Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (SOP 90-7) (Fresh-Start reporting). Since the reorganization value of the
assets of the Reorganized Company immediately before the date of confirmation is less than the total of all post-petition liabilities and allowed claims, and the holders of Predecessor Company voting shares immediately before confirmation received
less than 50 percent of the voting shares of the emerging entity, the Reorganized Company has adopted Fresh-Start reporting. Despite a legal emergence from bankruptcy on January 31, 2005, the Company satisfied all material conditions precedent to
the effectiveness of the Plan on December 27, 2004. The Company used December 31, 2004 as the date for adopting Fresh-Start reporting in order to coincide with the Companys normal financial closing for the month of December. The transactions
which occurred during the four-day period from December 28 to December 31, 2004 were not material individually or in the aggregate as they represented less than 1% of total revenues and operating income and less than 2% of income before taxes. Upon
adoption of Fresh-Start reporting, a new reporting entity was created for accounting purposes and the recorded amounts of assets and liabilities have been adjusted to reflect their estimated fair values. Accordingly, the reported historical
financial statements of the Company prior to the adoption of Fresh-Start reporting (the Predecessor Company) for periods ended prior to December 31, 2004 are not comparable to those of the Reorganized Company. Black lines on the
consolidated statements distinguish between pre-reorganization and post-reorganization. In this Annual Report on Form 10-K, references to the Companys operations and cash flows during the periods ended 2003 and 2002 refer to the Predecessor
Company.



SOP 90-7 requires that financial statements for the
period following the Chapter 11 filing through the bankruptcy confirmation date distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, revenues, expenses,
realized gains and losses and provisions for losses directly associated with the reorganization and restructuring of the business, including adjustments to fair value assets and liabilities and the gain on the discharge of pre-petition debt, are
reported separately as reorganization items, net, in the Predecessor Companys consolidated statement of operations. The Company incurred $18.779 million in reorganization expense throughout 2004, primarily related to legal and professional
fees.



Fresh-Start
Adjustments:    In accordance with Fresh-Start reporting, all assets and liabilities are recorded at their respective fair values as of December 31, 2004. Such fair values represent the Companys best estimates based on
both managements and independent appraisals and valuations.



To facilitate the calculation of the enterprise value of the Reorganized Company, the Company developed a set of five-year financial projections. Based on these financial projections, the enterprise value was determined by a financial
advisor, using various valuation methods, including (i) a comparison of the Company and its projected performance to the valuation of comparable public companies, (ii) a review and analysis of several recent transactions of companies in similar
industries to the Company, and (iii) cash flows derived from the financial projections, including an assumption for a terminal value, discounted back at the Reorganized Companys estimated weighted average cost of capital. This enterprise value
was approved by the Bankruptcy Court. For Fresh-Start reporting purposes, the enterprise value of the Reorganized Company was calculated to be $385 million assuming an average debt balance of $275 million. The implied value for the new common stock
is $25 million and the new convertible preferred stock is $85 million.



F-8



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



In applying Fresh-Start reporting, the adjustments to reflect the fair value of assets and
liabilities, on a net basis, the restructuring of the Companys capital structure and the resulting discharge of the senior lenders pre-petition debt, resulted in net reorganization expense of $59.413 million, recorded as reorganization
items, net on the consolidated statement of operations.



Fresh-Start reporting requires that the reorganization value be allocated to the entitys net assets in conformity with procedures specified by Statement of Financial Accounting Standards (SFAS) No. 141. The Company engaged
independent valuation specialists to assist in the fair market value of the Companys property and equipment, inventory, projected benefit obligations for pensions and accumulated postretirement benefit obligations for retiree health-care
benefits.



As part of the provisions of SOP 90-7, the
Reorganized Company was required to adopt on December 31, 2004 all accounting guidance that was required within the twelve-month period following December 31, 2004.



Changes to Significant Accounting Policies:    Fresh-Start reporting requires the selection of
appropriate accounting policies for the Reorganized Company. The significant accounting policies previously used by the Predecessor Company will continue to be used by the Reorganized Company except as described below.



A reconciliation of the items to be recorded in connection with the effects
of the Plan of Reorganization, the fresh-start accounting policy changes and the adjustments to fair value of assets and liabilities is presented below (in thousands):





F-9



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



CONSOLIDATED BALANCE SHEET DECEMBER 31, 2004



(Dollars and shares in thousands, except per share amounts)



|                                                                             |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|---------------------------------------------------------------------------- |  | -------------------------------------------------- | ------- | -------------------------- | ----------------------------------------- | ------ | ------------------------- | ---------------------------------- | - | ------- | ---- |  | - | ------- | --------- |  | - | -------
|                                                                             |  | Historical                                         |         | Reorganization Adjustments |                                           |        | Reorganized Balance Sheet
|                                                                             |  | Fresh-Start Debt Discharge & Cancellation of Stock |         |                            | Fresh-Start Accounting Policy Adjustments |        |                           | Fresh-Start Fair Value Adjustments |   |        
|ASSETS                                                                       |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|CURRENT ASSETS                                                               |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|Cash and cash equivalents                                                    |  | $                                                  | 17,694  |                            | $                                         |       |                           |                                    |   |         |      |  |   |         |           |  | $ | 17,694 
|Accounts receivable (net of reserve for doubtful accounts of $2,036 in 2004) |  |                                                    | 62,549  |                            |                                           |       |                           |                                    |   | (101    | )(2) |  |   |         |           |  |   | 62,448 
|Receivable from issuance of preferred stock                                  |  |                                                    |         |                            |                                           | 84,591 | (1)                       |                                    |   |         |      |  |   |         |           |  |   | 84,591 
|Inventories:                                                                 |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|Raw materials and finished products                                          |  |                                                    | 32,959  |                            |                                           |       |                           |                                    |   | (972    | )(3) |  |   | 2,605   | (3)       |  |   | 34,592 
|Operating supplies                                                           |  |                                                    | 14,401  |                            |                                           |       |                           |                                    |   | (1,585  | )(3) |  |   |        |           |  |   | 12,816 
|                                                                             |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|                                                                             |  |                                                    | 47,360  |                            |                                           |       |                           |                                    |   | (2,557  | )    |  |   | 2,605   |           |  |   | 47,408 
|Deferred income taxes                                                        |  |                                                    | 3,719   |                            |                                           |       |                           |                                    |   |         |      |  |   |         |           |  |   | 3,719  
|Other current assets                                                         |  |                                                    | 20,972  |                            |                                           |       |                           |                                    |   |         |      |  |   | (7,276  | )(4)      |  |   | 13,696 
|                                                                             |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|TOTAL CURRENT ASSETS                                                         |  |                                                    | 152,294 |                            |                                           | 84,591 |                           |                                    |   | (2,658  | )    |  |   | (4,671  | )         |  |   | 229,556
|NET PROPERTY AND EQUIPMENT                                                   |  |                                                    | 394,291 |                            |                                           |       |                           |                                    |   | (16,034 | )(6) |  |   | 61,010  | (17),(21) |  |   | 439,267
|GOODWILL (net of accumulated amortization of $11,093 in 2004)                |  |                                                    | 73,877  |                            |                                           |       |                           |                                    |   |         |      |  |   | (73,877 | )(5)      |  |   |       
|PREPAID PENSION COSTS                                                        |  |                                                    | 34,379  |                            |                                           |       |                           |                                    |   |         |      |  |   | (31,454 | )(7)      |  |   | 2,925  
|OTHER ASSETS                                                                 |  |                                                    | 12,604  |                            |                                           |       |                           |                                    |   |         |      |  |   | (4,568  | )(4)      |  |   | 8,036  
|                                                                             |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        
|TOTAL ASSETS                                                                 |  | $                                                  | 667,445 |                            | $                                         | 84,591 |                           |                                    | $ | (18,692 | )    |  | $ | (53,560 | )         |  | $ | 679,784
|                                                                             |  |                                                    |         |                            |                                           |        |                           |                                    |   |         |      |  |   |         |           |  |   |        



F-10



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



|                                                                                                      |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|----------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | ------- | ---- | ----------------------------------------- | - | --------- | ---------------------------------- |  | - | ---------- | ---------------------------- |  | - | ---------- | ------------------------------------- |  | - | -------
|                                                                                                      |  | Historical                                         |         |      | Reorganization Adjustments                |   |           | Reorganized Balance Sheet         
|                                                                                                      |  | Fresh-Start Debt Discharge & Cancellation of Stock |         |      | Fresh-Start Accounting Policy Adjustments |   |           | Fresh-Start Fair Value Adjustments |  |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                  |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|                                                                                                      |  |                                                    |         |      |                                          
|CURRENT LIABILITIES                                                                                   |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|Current portion of long-term debt                                                                     |  | $                                                  | 250,000 |      |                                           | $ | 92,166    | (11),(14),(15)                     |  | $ |           |                              |  |   |            |                                       |  | $ | 342,166
|Accounts payable                                                                                      |  |                                                    | 26,594  |      |                                           |   | 20,867    | (11)                               |  |   |            |                              |  |   |            |                                       |  |   | 47,461 
|Payrolls and other accrued compensation                                                               |  |                                                    | 6,770   |      |                                           |   | 4,873     | (9),(11)                           |  |   | 1,973      | (10)                         |  |   |            |                                       |  |   | 13,616 
|Accrued expenses                                                                                      |  |                                                    | 10,079  |      |                                           |   | 13,634    | (1),(4),(8),(11)                   |  |   | 1,464      | (18),(16),(19)               |  |   |           |                                       |  |   | 25,177 
|Accrued interest expense                                                                              |  |                                                    | 10,496  |      |                                           |   | 1,669     | (11),(15)                          |  |   |            |                              |  |   |            |                                       |  |   | 12,165 
|Income taxes payable                                                                                  |  |                                                    | 379     |      |                                           |   | 23        | (11)                               |  |   |            |                              |  |   |            |                                       |  |   | 402    
|                                                                                                      |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|TOTAL CURRENT LIABILITIES                                                                             |  |                                                    | 304,318 |      |                                           |   | 133,232   |                                    |  |   | 3,437      |                              |  |   |           |                                       |  |   | 440,987
|                                                                                                      |  |                                                    |         |      |                                          
|LONG-TERM DEBT, less current portion                                                                  |  |                                                    |        |      |                                           |   | 11,027    | (11)                               |  |   |            |                              |  |   |            |                                       |  |   | 11,027 
|POSTRETIREMENT BENEFITS OBLIGATION                                                                    |  |                                                    | 2,636   |      |                                           |   | 50,951    | (11)                               |  |   |            |                              |  |   | 8,589      | (13)                                  |  |   | 62,176 
|OTHER LONG-TERM LIABILITIES                                                                           |  |                                                    | 8,356   |      |                                           |   | 36,289    | (11),(12)                          |  |   | 517        | (19)                         |  |   | 4,512      |                                       |  |   | 49,674 
|DEFERRED INCOME TAXES                                                                                 |  |                                                    | 3,719   |      |                                           |   |          |                                    |  |   |            |                              |  |   | 2,191      | (7),(21),(22)                         |  |   | 5,910  
|                                                                                                      |  |                                                    |         |      |                                          
|LIABILITIES SUBJECT TO COMPROMISE                                                                     |  |                                                    | 308,002 |      |                                           |   | (308,002  | )(11)                              |  |   |            |                              |  |   |            |                                       |  |   |       
|                                                                                                      |  |                                                    |         |      |                                          
|STOCKHOLDERS EQUITY                                                                                  |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|Issuable Reorganized Company Preferred stock, par value $.01 authorized 30,000, issuable 8,500 shares |  |                                                    |        |      |                                           |   | 85        | (1)                                |  |   |           |                              |  |   |            |                                       |  |   | 85     
|Issuable Reorganized Company Additional capitalPreferred                                             |  |                                                    |        |      |                                           |   | 81,633    | (1)                                |  |   |            |                              |  |   | 3,282      | (1)                                   |  |   | 84,915 
|Issuable Reorganized Company Common stock, par value $.01 authorized 90,000, issuable 2,929 shares    |  |                                                    |        |      |                                           |   | 29        | (15)                               |  |   |            |                              |  |   |            |                                       |  |   | 29     
|Issuable Reorganized Company Additional capitalCommon                                                |  |                                                    |        |      |                                           |   | 24,981    | (15)                               |  |   |           |                              |  |   |            |                                       |  |   | 24,981 
|Preferred stock, 5,000 shares authorized                                                              |  |                                                    |        |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |       
|Common stock, par value $1.00 per shareauthorized 30,000; issued 7,253 shares                        |  |                                                    | 7,253   |      |                                           |   |          |                                    |  |   |            |                              |  |   | (7,253     | )(20)                                 |  |   |       
|Additional capital                                                                                    |  |                                                    | 6,895   |      |                                           |   |          |                                    |  |   |            |                              |  |   | (6,895     | )(20)                                 |  |   |       
|Retained earnings                                                                                     |  |                                                    | 59,413  | (23) |                                           |   | 54,366(12 | (1),(4),(8),(9),),(14),(15)        |  |   | (22,646(16 | )(2),(3),(6),(10)),(18),(19) |  |   | (91,133(13 | )(1),(3),(4),(5),(7),),(17),(20),(22) |  |   |       
|Accumulated other comprehensive loss                                                                  |  |                                                    | (5,510  | )    |                                           |   |          |                                    |  |   |            |                              |  |   | 5,510      | (7)                                   |  |   |       
|                                                                                                      |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|                                                                                                      |  |                                                    | 68,527  |      |                                           |   | 161,094   |                                    |  |   | (22,646    | )                            |  |   | (96,489    | )                                     |  |   | 110,010
|Treasury stock, at cost                                                                               |  |                                                    | (27,637 | )    |                                           |   |          |                                    |  |   |           |                              |  |   | 27,637     | (20)                                  |  |   |       
|                                                                                                      |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|                                                                                                      |  |                                                    | 40,890  |      |                                           |   | 161,094   |                                    |  |   | (22,646    | )                            |  |   | (68,852    | )                                     |  |   | 110,010
|                                                                                                      |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                            |  | $                                                  | 667,445 |      |                                           | $ | 84,591    |                                    |  | $ | (18,692    | )                            |  | $ | (53,560    | )                                     |  | $ | 679,784
|                                                                                                      |  |                                                    |         |      |                                           |   |           |                                    |  |   |            |                              |  |   |            |                                       |  |   |        



F-11



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Issuance of Convertible Preferred Stock



(1) It was a material condition to the Plan of Reorganization that the Predecessor Company raise $85 million of new
financing. To meet this condition, the Reorganized Company issued and sold an aggregate of 8,500,000 shares of convertible preferred stock pursuant to a rights offering and a commitment agreement for $85 million. The Reorganized Company used the net
proceeds from the issuance and sale of the convertible preferred stock and available cash and borrowings under the post-emergence credit facility to redeem the 18% Senior Secured Notes in the principal amount of $84.677 million at December 31, 2005.



Pursuant to the rights offering, holders of the Predecessor
Companys Senior Subordinated Notes claims that were not parties to the commitment agreement purchased an aggregate of 5,139,200 shares of convertible preferred stock at $10 per share for a total purchase price of $51.392 million. Pursuant to
the commitment agreement, the subscribers purchased an aggregate of 3,360,800 shares of convertible preferred stock at $10 per share for a total purchase price of $33.608 million.



Pledges receivable of $85 million were obtained by the Predecessor Company as of December 27, 2004 and are recorded as a
receivable of $84.591 million on the Reorganized Companys consolidated balance sheet. The receivable was discounted by one month to represent the time value of money of the actual cash that will be received ($85 million) on January 31, 2005.
The difference between the receivable and the implied value of the preferred stock is charged to reorganization items, net.



The convertible preferred stock has a par value of $.01 per share and 8,500,000 shares were issued and outstanding as of the Effective Date. The implied
value of the Reorganized Companys preferred stock is $85 million, with the excess above par going to additional paid in capital on the convertible preferred stock.



The equity commitment fees, valued at $3.282 million, in conjunction with this placement would normally reduce additional
paid in capital. An accrual was recorded for the $3.282 million in other accrued expense on the Reorganized Companys consolidated balance sheet. However, as a fair value adjustment during Fresh-Start reporting, the $3.282 million was expensed
as a reorganization item, net.



Allowance for Doubtful Accounts Receivable



(2)As part of Fresh-Start reporting, the
Reorganized Company changed its accounting policy for estimating the reserve necessary to state trade receivable accounts at net realizable value. This accounting policy change increased the Reorganized Companys allowance for doubtful accounts
by $101,000 and was expensed as a reorganization item, net.



Inventory



(3) As part of adopting Fresh-Start reporting on
December 31, 2004, the Predecessor Company adjusted its inventory costing policy for work-in-process and finished goods from a twelve-month average cost to a first-in, first-out cost method (based on monthly averages). The Company also made a
conforming change to its method of determining inventory densities in the Great Lakes Minerals segment that reduced the Reorganized Companys inventory by $638,000. The charge is expensed as reorganization items, net.



The Reorganized Company has adopted an accounting policy to reserve for the
storage of backyard inventory. This policy reduced the Reorganized Companys inventory by $1.919 million. The charge is expensed as reorganization items, net.



F-12



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



The Predecessor Company used management and independent valuation specialists to calculate the
profits earned by the Predecessor Company related to the expended mining effort of the Predecessor Companys work-in-process and finished goods inventory to reflect a fair value of such inventory. The adjustment to the Reorganized
Companys inventory values (including the prior adjustments to density factors and slow moving inventory described above) was a net increase of $2.605 million. This credit is recorded in reorganization items, net.

Deferred Financing Fees



(4) The Predecessor Companys deferred financing fees related to its second DIP facility, Senior Secured Notes and Senior Subordinated Notes
as of December 31, 2004, were included in other current assets ($7.276 million) and Other Assets ($4.568 million) in the consolidated balance sheet. The deferred financing fees were written off as a fair value adjustment, with an $11.844 million
charge to reorganization items, net.



In addition, the
Predecessor Company incurred $1.203 million in bank related fees for professional services and title insurance for the closing of the post-emergence credit facility that were accrued in other accrued expense and expensed as a charge to
reorganization items, net.



Goodwill



(5) The Predecessor Company had $73.877 million of goodwill which was
written off as a fair value adjustment in Fresh-Start reporting at December 31, 2004, with the charge to reorganization items, net.



Capitalized Stripping



(6) Historically, the Predecessor Companys policy was that certain mining costs associated with the removal of waste rock in the mining
process were recorded at cost and amortized on a units of production method based upon recoverable reserves. The capitalized costs were included as part of mineral reserves in property and equipment and the amortization is included with accumulated
depreciation, depletion and amortization in the consolidated balance sheet.



As part of the Companys accounting policy changes for Fresh-Start reporting, the Company will no longer capitalize these costs, but rather inventory these costs as part of normal production and expense into cost
of goods sold as inventory is sold. Accordingly, $29.865 million that was capitalized in the historical financials as part of mineral reserves in property and equipment and $13.831 million that was part of accumulated depreciation, depletion and
amortization on the historical financials are expensed as reorganization items, net.



Pensions



(7) In accordance with
Fresh-Start reporting, the assets and liabilities of the Reorganized Companys defined benefit plan are recorded at their fair value, which represents the net amount of the fair market value of pension assets compared with the projected benefit
obligation. At December 31, 2004, the Reorganized Companys fair value of assets was $92.440 million and the projected benefit obligation was $102.853 million. The fair value of each plan resulted in a prepaid pension cost asset of $2.925
million and a pension liability of $13.174 million. The adjustment to fair value resulted in a $43.132 million charge to reorganization items, net and the reduction of the Predecessor Company prepaid pension cost asset by $31.454 million, an
increase of $3.755 million in other long-term liabilities related to the accrual for pension liabilities, a net reduction of $5.510 million in accumulated other comprehensive loss related to the Predecessor Company minimum pension liability, and a
$2.412 million increase in the deferred tax liability relating to the tax effects of the accumulated other comprehensive loss.



F-13



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Success Fee



(8) The Companys Plan of Reorganization included a success fee for the Predecessor Companys financial advisors and the Creditors
Committees financial advisors that was to be payable upon legal emergence from bankruptcy. The accrual for this success fee was $2.75 million and expensed as a charge to reorganization items, net.



Management Incentive Plan



(9) The Reorganized Companys Plan of Reorganization included a
cash-based management incentive plan for certain salaried employees of the Company that was to be payable upon legal emergence from bankruptcy. The accrual for this plan, including employer taxes, was $2.581 million at December 31, 2004.
Additionally, the management incentive plan included an award of stock options that vested upon emergence to certain employees with a fair value of $487,000. These expenses were recorded to reorganization items, net.



Accrued Vacation



(10) The Reorganized Company is making a conforming change to its vacation accrual accounting policy as part of
Fresh-Start reporting for its salaried employees and non-union hourly employees. The change increased the Reorganized Companys vacation accrual by $1.973 million and that change is expensed as reorganization items, net.



Liabilities Subject to Compromise



(11)The December 31, 2004 Predecessor Companys balance sheet
before the adjustments for Fresh-Start reporting included $308,002 million of total liabilities subject to compromise. These liabilities represent items that were pre-petition liabilities and potentially impaired in the bankruptcy. The adjustments
needed to reflect the confirmation of the Plan move the majority of these liabilities out of the subject to compromise category, since none of these liabilities are impaired. At December 31, 2004 liabilities subject to compromise were as follows (in
thousands):



|                                       |  |   |        
|-------------------------------------- |  | - | -------
|Current portion of long-term debt      |  | $ | 187,060
|Accounts payable                       |  |   | 20,867 
|Payroll and other accrued compensation |  |   | 2,292  
|Accrued expenses                       |  |   | 6,998  
|Accrued Interest expense               |  |   | 7,280  
|Income taxes payable                   |  |   | 23     
|OTHER LONG-TERM LIABILITIES            |  |   | 21,504 
|LONG-TERM DEBT, less current portion   |  |   | 11,027 
|POSTRETIREMENT BENEFITS OBLIGATION     |  |   | 50,951 
|                                       |  |   |        
|TOTAL                                  |  | $ | 308,002



Michigan Limestone Purchase
Agreement



(12)When the Predecessor Company
acquired the Michigan Limestone operation, the purchase price included contingent payments subject to achieving certain operating performance parameters through 2011. At December 31, 2003 the Predecessor Company accrued a contingent payment of $2.1
million that was due to be paid in February 2004, but was not paid and was stayed as a result of the bankruptcy filing



F-14



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



After the petition date, the Creditors Committee entered into negotiations with certain of the
holders of the MLO claims regarding possibly amending the interest purchase agreement. See Contingent Payments in the accounting policy section for further discussion.



Based upon the Companys historical experience on tonnage shipments and other estimates, the estimated Fresh-Start
reporting liability related to the Amended Agreement with former owners of MLO is $16.285 million, with $1.5 million classified in other accrued expenses and $14.785 million classified in other long-term liabilities on the Predecessor Companys
consolidated balance sheet. This change will increase the accrual by $14.185 million and that change is expensed as reorganization items, net.



Other Postretirement Benefits



(13) In accordance with Fresh-Start reporting, the liability for other postretirement benefits should be adjusted to fair value, which is the
projected benefit obligation in excess of the fair value of plan assets. Based upon the December 31, 2004 projected postretirement benefit obligations in excess of the fair value of plan assets, the Predecessor Company recorded an increase of $8.589
million in the postretirement benefit obligation on the Predecessor Companys consolidated balance sheet. This charge was recorded as reorganization items, net.



Senior Secured Notes



(14) The Companys debt structure includes Senior Secured Notes ($84.677 million at December 31, 2004). The Plan of Reorganization allowed the
Company to reinstate the Senior Secured Notes and retire the debt at 106% of par. The 6% premium over par was $5.106 million and is included in the Senior Secured Note balance with a related charge to reorganization items, net.



Senior Subordinated Notes



(15) The holders of our allowed Senior Subordinated Notes of $100
million at December 31, 2004 and interest accrued of $5.611 million will receive distributions of the Reorganized Companys common stock in satisfaction of their claims. The common stock has a par value of $.01 per share and 2,928,571 shares
will be issued to the former holders of the Senior Subordinated Notes. The holders of the Senior Subordinated Notes are receiving an estimated $24.523 million in implied value. The difference between the $105.611 million in debt and accrued interest
and the $24.523 million in equity is debt forgiveness income included in reorganization items, net.



Vessel Accrual Costs



(16) As part of the Fresh-Start reporting process, the Reorganized Company changed its accounting policy on the accrual of end of sailing season expenses on its vessels. The Reorganized Company will expense one years costs
associated with lay-up and winterization of the vessels to match with each sailing seasons revenues earned. This accounting policy change increased the Reorganized Companys accrued expenses by $1.173 million and was expensed as a
reorganization item, net.



Asset Retirement Obligations



(17)The Predecessor and Reorganized Company are legally required by
various state and local regulations and/or contractual agreements to reclaim land disturbed by quarrying activities and to remove buildings, land improvements and fixed equipment from certain properties upon termination of mining. The Reorganized



F-15



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Company is required to adjust its asset retirement obligation liability to fair value in Fresh-Start reporting which is the present value of amounts to be
paid determined at appropriate current interest rates. This adjustment increased the asset retirement obligation liability by $758,000.



In addition, the Reorganized Company will value the fixed asset component of the asset retirement obligation liability at the same value and eliminate the
associated accumulated depreciation previously recorded by the Predecessor Company. The impact is that the Reorganized Oglebay will increase the net land reclamation asset by $4.821 million with the net credit of $4.063 million being recognized as a
reorganization item, net.



Insurance



(18) The Reorganized Company is changing its accounting policy as
part of Fresh-Start reporting for the accrual of claims covered by certain protection and indemnity insurance policies in its Great Lakes Minerals segment. The change increased the Reorganized Companys insurance accrual by $260,000 and that
change is expensed as reorganization items, net.



Global Stone Filler
Products Stone Agreement



(19)As part of
Fresh-Start reporting, the Reorganized Company changed its accounting policy related to the prior owners rights to free and/or below market value stone at the Global Stone Filler Products location in Chatsworth, Georgia. This accounting policy
change increased the Reorganized Companys accrued expenses by $32,000 and other long-term liabilities by $517,000 and was expensed as a reorganization item, net.



Equity



(20) This amount represents all adjustments to eliminate the Predecessor Companys historical common stock, retained earnings, additional
capital, treasury stock and other accumulated comprehensive income.



Property and Equipment



(21) As part of
Fresh-Start reporting, all assets are recorded at their respective fair values. Because of that requirement and the material nature of the property, plant and equipment, the Company engaged an independent valuation specialist to appraise its
property, plant and equipment. Because each asset will be recorded at fair value, the accumulated depreciation has been netted with the gross property, plant and equipment on the Reorganized Companys consolidated balance sheet. The result of
the debt forgiveness and Fresh-Start reporting adjustments contemplated, compared with the reorganization value would require the Reorganized Company to write up its property and equipment by $56.189 million and increase its deferred tax liability
by $21.914 million.



F-16



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Deferred Taxes



(22) As part of Fresh-Start reporting, the Company recognized over $80 million of debt forgiveness income (recorded in reorganization items, net,
see Item 6 above). This adjustment allows the Company to reduce the valuation allowance needed on its net deferred tax assets by $10.408 million, with the credit going to reorganization items, net.



Additionally there are changes to the deferred tax liability based upon the
changes to the assets and liabilities related to the Fresh-Start valuation adjustments and planned debt forgiveness.



Professional Fees



(23) The Predecessor Company incurred $18.779 million of reorganization expense, net, throughout 2004. These expenses were primarily related to
legal and professional fees.



ACCOUNTING POLICIES



Below is a list of the Companys accounting policies



Principles of Consolidation:    The consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and accounts have been eliminated upon consolidation.



Cash Equivalents:    The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at cost which approximates market value.



Accounts Receivable:    The Company is required to estimate the collectability of its accounts receivable. The Companys
reserve for doubtful accounts is estimated by management based on a review of historic losses, existing economic conditions and the level and age of receivables from specific customers.



Inventories:    Raw materials, spare parts and operating supplies, work-in-process and finished
goods inventory were adjusted to fair value at December 31, 2004 as part of Fresh-Start reporting. As part of accounting policy changes in Fresh-Start reporting, the Company will change its inventory costing policy for work-in-process and finished
goods in 2005 from a twelve-month average cost to the first-in, first-out cost method (based on monthly averages). Raw materials will be stated at the lower of actual cost (first-in, first-out method) or market. Spare parts and operating supplies
will be stated at actual cost or average cost. Additionally, the Company has an inventory valuation reserve for inventory amounts on hand that are in excess of one year of sales.



Property and Equipment:    Property and equipment are stated at cost, except for assets that were
adjusted to fair value as part of Fresh-Start reporting. The Companys prior accumulated depreciation was eliminated and all assets were stated at fair value. That fair value was then adjusted pro-rata, based upon the enterprise value of the
Company in accordance with FAS No. 141 and SOP 90-7. The Company provides depreciation on buildings and improvements and machinery and equipment using the straight-line method over the assets estimated useful lives. In general, when new,
useful lives range from 2 to 5 years for computer equipment and software, 5 to 20 years for plant, machinery and equipment, 20 to 40 years for buildings and improvements, and up to 60 years for the Companys marine vessels. Expenditures for
repairs and maintenance are charged to operations as incurred. Vessel inspection costs are capitalized and amortized over the shipping seasons between required inspections. Mineral reserves and mining costs associated with the removal of waste rock
in the mining process were previously recorded at cost and were depleted or amortized on a units of production method based upon recoverable reserves. As an accounting policy change in Fresh-Start reporting at December 31, 2004, the Company is now
treating these costs as regular production costs and part of inventory.



Intangible Assets:    Intangible assets consist primarily of goodwill and financing costs. In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142),



F-17



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



which the Company adopted at January 1, 2002, the Company reviews goodwill for impairment at least annually using a two-step impairment test to first
identify potential impairment and then to measure the amount of the impairment, if any. In 2003 and 2002, these tests indicated that goodwill was not impaired. At December 31, 2004, as part of the Fresh-Start reporting fair value adjustments, both
Predecessor Company goodwill and deferred financing costs were charged to reorganization items, net.



In 2003, additions to goodwill from acquisitions totaled $4.149 million, while reductions of goodwill from dispositions totaled $3.316 million.



Financing costs were amortized using the straight-line method
over the respective periods of the loan agreements, which ranged from ten months to 10 years. In 2004, $3.64 million was expensed upon the payment of the pre-petition credit facility before its scheduled maturity.



Impairment of Tangible Long-Lived Assets:    If an
impairment indicator exists, the Company assesses the recoverability of its tangible long-lived assets by determining whether the amortization of the remaining balance of an asset over its remaining useful life can be recovered through undiscounted
future operating cash flows. If impairment exists, the amount of impairment is calculated using a discounted future operating cash flow analysis and the carrying amount of the related asset is reduced to fair value. See Note D to the consolidated
financial statements for impairment charges recognized by the Company in 2004, 2003 and 2002.



Derivative Instruments:    The Company recognizes all of its derivative instruments as either assets or liabilities in the consolidated balance sheet at fair value. The accounting for
changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments
that are designated and qualify as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge.



For derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in
expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line
item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (for example, in interest expense when the hedged transactions are interest cash flows associated with variable
rate debt). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in other income (expense)net in operations during the
period of change. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in other income (expense)net in operations during the period of change. Refer to Note G to the consolidated financial statements
for further discussion on the Companys use of derivative instruments.



Asset Retirement Obligations:    The Company adopted Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, at January 1,
2003. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred and capitalized as part of the carrying amount of the long-lived asset. Over time, the liability is
recorded at its present value each period through accretion expense, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, a company either settles the obligation for its recorded amount
or recognizes a gain or loss.



The Company is legally required
by various state and local regulations and/or contractual agreements to reclaim land disturbed by its quarrying activities and to remove buildings, land improvements and fixed



F-18



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



equipment from certain properties. Upon adoption of SFAS No. 143, the Company recorded asset retirement obligations totaling $5.854 million, increased net
property and equipment by $3.574 million and recognized a non-cash cumulative effect charge of $1.391 million (net of income tax benefit of $889,000). The Company re-evaluated the asset retirement obligation as of July 1, 2004. This update resulted
in a $674,000 increase to the asset retirement obligation and the related long-lived asset in the third quarter of 2004. Asset retirement obligations are included in other long-term liabilities on the consolidated balance sheet.



Asset retirement obligations were estimated for each of the Companys
operating locations, where applicable, based on the Companys current and historical experience, adjusted for factors that an outside third-party would consider, such as inflation, overhead and profit. Estimated obligations were escalated based
upon the anticipated timing of the related cash flows and the expected closure dates of the operating locations using an assumed inflation rate, and then were discounted using a credit-adjusted, risk-free interest rate. The expected closure date of
each location represents the estimated exhaustion date of remaining mineral reserves or, for leased locations, the lesser of the mineral reserve exhaustion date or lease termination date. Because the Companys mineral reserves and lease
agreements have expected lives many years into the future, an appropriate market risk premium could not be estimated or considered when escalating the estimated obligations. The accretion of the asset retirement obligations and depreciation of the
capitalized costs, which are included in depreciation, depletion, amortization and accretion on the consolidated statement of operations, are being recognized over the estimated useful lives of the operating locations (i.e., to their expected
closure dates). A movement of the Companys asset retirement obligations during the years ended December 31, 2004 and 2003 follows (in thousands):



|                                                                          |  |                          |       |   |                          |   |      
|------------------------------------------------------------------------- |  | ------------------------ | ----- | - | ------------------------ | - | -----
|                                                                          |  | Predecessor Company 2004 |       |   | Predecessor Company 2003
|Asset retirement obligations upon adoption at January 1                   |  | $                        | 6,779 |   |                          | $ | 5,854
|Accretion expense                                                         |  |                          | 488   |   |                          |   | 481  
|Provisions and adjustments to prior reserves and actual expenditures, net |  |                          | 571   |   |                          |   | 444  
|Fresh-Start fair value adjustment                                         |  |                          | 758   |   |                          |   |      
|                                                                          |  |                          |       |   |                          |   |      
|Balance at December 31                                                    |  | $                        | 8,596 | * |                          | $ | 6,779
|                                                                          |  |                          |       |   |                          |   |      

---

|* |  | Note that the December 31, 2004 balance represents the Reorganized Companys liability.
|- |  | ---------------------------------------------------------------------------------------



As part of Fresh-Start reporting at December 31, 2004, the Company re-evaluated its asset retirement obligations and
adjusted its land reclamation asset to equal the liability for asset retirement obligations and eliminated all prior accumulated depreciation.



Pro forma effects on 2002, assuming that SFAS No. 143 had been applied, were not material to reported net loss and net loss per share.



Contingent Payments:    The purchase price of the
Companys Michigan Limestone operation, which was acquired by the Company in the second quarter of 2000, included contingent payments subject to achieving certain operating performance parameters through 2011. The Company accrued contingent
payments of $2.1 million and $3.072 million at December 31, 2003 and 2002, respectively, representing additional purchase price and an increase to recorded mineral reserves. The $2.1 million accrued contingent payment at December 31, 2003 was not
paid.



After the petition date, the Creditors
Committee entered into negotiations with certain of the holders of the MLO claims regarding amending the interest purchase agreement. Mr. Lundin, CEO of the Company, had no involvement with these negotiations. The Cary Mining Company, Inc., one of
the holders of MLO claims, was a member of the Creditors Committee, but took no part in, and was excluded from any involvement in, all of the negotiations and discussions of the Creditors Committee regarding the MLO claims. As a result
of these



F-19



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



negotiations, the interest purchase agreement was amended and assumed (as amended) by the Company as of the Effective Date. Specifically, pursuant to the
amended interest purchase agreement, the parties agreed to significantly reduce the aggregate annual amount of contingent payments and to extend the time period within which the contingent payments are to be made by four to six years. The amended
interest purchase agreement provides for maximum aggregate amounts of annual contingent payments in the period 2003 through 2016 as follows:



| |  |  | $625,000 for 2003 (paid upon the Effective Date);
| | - |  | -------------------------------------------------



| |  |  | $1.025 million for the period 2004-2006; and
| | - |  | --------------------------------------------



| |  |  | $2.65 million for the period 2007-2016.
| | - |  | ---------------------------------------



In addition, the amended interest purchase agreement provides that:



| |  |  | beginning with the Companys 2004 fiscal year, EBITDA payments are determined based upon the Companys consolidated EBITDA and all of the Companys subsidiaries
rather than the aggregate EBITDA of the purchased quarries and/or the purchased operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys subsidiaries execute and deliver guaranty agreements as adequate assurance of future performance within the meaning of the Bankruptcy Code;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of MLO claims waive any right, upon assumption and assignment to the Company of the amended interest purchase agreement, to any cure amounts or adequate assurance of
future performance within the meaning of the Bankruptcy Code, other than as provided in the amended interest purchase agreement; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of MLO claims consent to any change in control resulting from the Companys emergence from Chapter 11 and waive any rights that they have (or might have had) to
demand accelerated contingent payments as a result of the commencement or pendency of the Companys Chapter 11 cases or the Companys emergence from Chapter 11.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Mr. Lundin received payments totaling $571,000 in 2002 and $391,000 in 2003 as his 18.6% share of the contingent payments.
Mr. Lundin did not receive any contingent payment in 2004 but received a payment of $112,525 on the Effective Date.



Stock Compensation:    Prior to application of Fresh-Start reporting, the Predecessor Company accounted for stock-based
compensation using the intrinsic value method of accounting in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The table below
summarizes stock compensation cost included in the determination of net loss using the intrinsic value method and the impact on net loss and net loss per share, assuming dilution, had the Company accounted for stock-based compensation using the
alternative fair value method of accounting (in thousands, except per share amounts). See Note I to the consolidated financial statements for further discussion:



|                                                                                            |  |      |          |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                            |  | 2004 |          |   | 2003 |   |         | 2002 | 
|Stock compensation cost included in the determination of net loss, as reportednet of taxes |  | $    | 19       |   |      | $ | 296     |      |  | $ | 369    |  
|                                                                                            |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss, as reported                                                                       |  | $    | (106,075 | ) |      | $ | (33,192 | )    |  | $ | (6,608 | )
|Estimated fair value of stock compensation cost, net of taxes                               |  |      | (231     | ) |      |   | (515    | )    |  |   | (731   | )
|                                                                                            |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss, as adjusted                                                                       |  | $    | (106,306 | ) |      | $ | (33,707 | )    |  | $ | (7,339 | )
|                                                                                            |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss per share, as reportedassuming dilution                                           |  | $    | (20.27   | ) |      | $ | (6.48   | )    |  | $ | (1.32  | )
|                                                                                            |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss, as adjustedassuming dilution                                                     |  | $    | (20.31   | ) |      | $ | (6.58   | )    |  | $ | (1.46  | )
|                                                                                            |  |      |          |   |      |   |         |      |  |   |        |  



See Recently
Adopted Accounting Standards below for a discussion on SFAS 123(R).



F-20



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Use of Estimates:    The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Companys consolidated financial statements and accompanying notes. Actual results could differ
from those estimates and assumptions.



Revenue
Recognition:    Sales are recognized when products are shipped and title transfers to customers. Operating revenues are recognized as services are provided to customers. For Great Lakes shipments in transit at year-end, the
Company recognizes revenue pro-ratably based upon the number of sailing days per voyage. Total net sales and operating revenues include external freight billed to customers with the related costs included in cost of sales.



Pooling Arrangement:    The Companys Great
Lakes Minerals segment pools its fleet operations with the fleet operations of American Steamship Company, a wholly owned subsidiary of GATX Corporation. The multi-year pooling agreement provides for the coordination of dispatch and other fleet
operations but does not involve the transfer of any assets. Each party to the pooling agreement records operating revenues and operating expenses related to the operation of their fleet vessels. Operating income is allocated between the Company and
American Steamship Company in accordance with the sharing provisions outlined in the pooling agreement (including capacity considerations, volume and type of contracts, etc.) The allocation of operating income is determined periodically by a joint
board.



Income Taxes:    The Company
utilizes certain tax preference deductions afforded by law to mining companies. Although the amount of these deductions is materially consistent from year to year, these permanent book/tax differences can cause significant fluctuations in the
Companys effective tax rate based upon the level of pre-tax book income or loss.



The Company continues to incur tax operating losses and there is an uncertainty regarding the future realization of any portion of these losses as a tax benefit. Accordingly, the Company has recorded a tax valuation
allowance for net deferred tax assets and will maintain such an allowance until sufficient positive evidence (i.e., cumulative positive earnings and future taxable income) exists to support the reversal of the valuation allowance.



Reclassifications:    Certain amounts in prior
years have been reclassified to conform to the 2004 consolidated financial statement presentation.



Recently Adopted Accounting Standards



In May 2004, the FASB issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) No. 106-2 Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (FSP FAS No. 106-2). FSP FAS No. 106-2 is effective for interim or annual periods beginning after June 15, 2004. See Note J to the consolidated financial statements for the effect of FSP FAS No. 106-2.



In December 2004, the Financial Accounting Standard Board
(FASB) issued FASB No. 123 (revised 2004), Share-Based Payment(Statement 123(R)), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95 Statement of Cash Flows.



Generally, the approach to accounting for share-based payments in Statement 123(R) is similar to the approach described in Statement 123. However,
Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Pro forma disclosure is no longer an alternative.



F-21



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Statement 123(R) must be adopted no later than July 1, 2005. Early adoption is permitted in financial
statements which have not yet been issued. Due to Fresh-Start reporting, the Company is required to adopt Statement 123(R) as a Fresh-Start adjustment on December 31, 2004. The effects of Statement 123 (R) will be reflected as of January 1, 2005.



Statement 123(R) permits public companies to adopt its requirements using one
of two methods:



1. A modified
prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of
Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date.



2. A modified retrospective method which includes the requirements of the modified prospective method described above, but
also permits entities to restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.



The Company plans to adopt Statement 123(R) using the modified-prospective
method.



In December 2004, the FASB issued SFAS No. 151,
Inventory Costs, an amendment of ARB No. 43, Chapter 4 (SFAS No. 151), which requires that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) be recognized as
current-period charges. In addition, the statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning
after June 15, 2005. Due to Fresh-Start reporting, the Company is required to adopt SFAS No. 151 as a Fresh-Start adjustment on December 31, 2004. Management does not believe the adoption will have a material effect on the Companys results of
operations, financial condition or liquidity.



In December
2004, the FASB issued FSP FAS No. 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers by the American Jobs Creation Act of 2004 (FSP FAS No.
109-1). This statement requires the qualified production activities deduction as defined in the American Jobs Creation Act of 2004 (the Jobs Act) to be accounted for as a special deduction in accordance with SFAS No. 109, Accounting
for Income Taxes. The statement also requires that the special deduction should be considered in measuring deferred taxes when graduated tax rates are a significant factor and when assessing whether a valuation allowance is necessary. FSP
FAS No. 109-1 was effective upon issuance. In accordance with the Jobs Act, determination of the qualified production activities deduction is not required until 2005, however, due to Fresh-Start reporting, the Company is required to adopt FSP FAS
No. 109-1 as a Fresh-Start adjustment on December 31, 2004. Due to the projected tax losses for the next few years, management does not believe that this statement will have a material effect on the Companys results of operations, financial
condition and liquidity.



NOTE CACQUISITIONS AND DISPOSITIONS



In separate transactions in January 2004, the Predecessor
Company sold two assets of its Erie Sand and Gravel operations (the Redi-Mix business unit and the vessel M/V Richard Reiss) to E.E. Austin & Son, Inc. and Grand River Navigation Company, Inc., respectively. The Redi-Mix business unit was
comprised of Serv-All Concrete, Inc. and S&J Trucking, Inc. These assets were not considered integral to the long-term strategic direction of the Predecessor Company. Proceeds from the sales were $1.225 million for Redi-Mix and $1.8 million for
the vessel. No gain or loss on sale was recognized by the Predecessor Company.



F-22



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



In conjunction with the sale of the Redi-Mix business unit, the Predecessor Company entered into a
long-term supply agreement with E.E. Austin & Son, Inc. dated January 21, 2004, pursuant to which the Predecessor and Reorganized Company will provide certain aggregates at market prices to E.E. Austin & Son, Inc. for an initial term of
fifteen years beginning on the closing date of the agreement. Additionally, the Predecessor and Reorganized Company and E.E. Austin & Son, Inc. entered into a sublease agreement dated January 21, 2004, whereby E.E. Austin & Son, Inc. is
subleasing property from the Company previously dedicated to the operation of the Redi-Mix business unit. The initial term of the sublease agreement commenced in January 2004 and extends to December 31, 2019. The agreement is renewable in five-year
increments thereafter, upon agreement by both parties.



On
October 27, 2003, as part of its ongoing business restructuring, the Predecessor Company sold the Lawn and Garden business unit of its Global Stone operating segment to Oldcastle Retail, Inc. (Oldcastle). The sales price was $10 million of value
subject to working capital adjustments. Based upon those working capital adjustments, the Predecessor Company received $6.871 million in cash at closing. The net book value of the Lawn and Garden business unit at the closing date, including an
allocation of the Global Stone segments goodwill of $3.316 million, was $10.057 million. The Predecessor Company recognized a loss on disposition of assets of $3.692 million during the fourth quarter of 2003. Due to the finalization of the
purchase price during 2004, the Predecessor Company recognized a $29,000 gain.



In conjunction with the sale of the Lawn and Garden business unit, the Predecessor Company entered into a long-term supply agreement with Oldcastle dated October 27, 2003, pursuant to which the Predecessor and the
Reorganized Company will provide certain raw materials at market price to Oldcastle for an initial term of ten years beginning on the closing date of the agreement, with a renewal option for an additional ten-year period. The Predecessor Company and
Oldcastle also entered into a lease and operation of equipment agreement dated October 27, 2003, whereby certain areas of the Companys York, Pennsylvania, operations previously dedicated to Lawn and Garden operations are being leased at market
rates to Oldcastle through December 31, 2005.



In early January
2003, the Predecessor Company acquired all of the outstanding common shares and other ownership interests in a group of companies together known as Erie Sand and Gravel Company (Erie Sand and Gravel) for $6.831 million in cash and $4.069 million in
assumed debt, which was refinanced at closing. The acquisition included fixed assets of $5.446 million and goodwill of $4.149 million. Erie Sand and Gravel operates a dock, a bulk products terminal, a Great Lakes self-unloading vessel, a sand
dredging and processing operation, a ready-mix concrete mixing facility and a trucking company that distribute construction sand and aggregates in the northwest Pennsylvania/western New York region. The net assets and results of operations of Erie
Sand and Gravel are included within the Companys Great Lakes Minerals segment.



F-23



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



NOTE DRESTRUCTURING, ASSET IMPAIRMENTS AND VOLUNTARY EARLY RETIREMENT



The following summarizes the provision for restructuring, asset impairments
and early retirement programs and the remaining reserve at December 31, 2004 (in thousands):



|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------------------------ | - | ------- | ---------------- |  | - | ------ | - |  | - | ------- | -
|                                                  |  | Employee Retirement & Severance Benefits |        |   | Asset Impairment Charges |   |         | Other Exit Costs |  |   | Total  |  
|Remaining reserve at January 1, 2002              |  | $                                        | 2,563  |   |                          | $ | -0-     |                  |  | $ | 2,280  |   |  | $ | 4,843   |  
|2002 charge                                       |  |                                          |        |   |                          |   | 1,154   |                  |  |   |        |   |  |   | 1,154   |  
|Amounts utilized                                  |  |                                          |        |   |                          |   | (1,154  | )                |  |   |        |   |  |   | (1,154  | )
|Actual expenditures                               |  |                                          | (1,500 | ) |                          |   |         |                  |  |   | (1,077 | ) |  |   | (2,577  | )
|Provisions and adjustments to prior reserves, net |  |                                          | (298   | ) |                          |   |         |                  |  |   | 66     |   |  |   | (232    | )
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|Remaining reserve at December 31, 2002            |  | $                                        | 765    |   |                          | $ | -0-     |                  |  | $ | 1,269  |   |  | $ | 2,034   |  
|2003 charge                                       |  |                                          |        |   |                          |   | 13,272  |                  |  |   |        |   |  |   | 13,272  |  
|Amounts utilized                                  |  |                                          |        |   |                          |   | (13,272 | )                |  |   |        |   |  |   | (13,272 | )
|Actual expenditures                               |  |                                          | (759   | ) |                          |   |         |                  |  |   | (428   | ) |  |   | (1,187  | )
|Provisions and adjustments to prior reserves, net |  |                                          | 36     |   |                          |   |         |                  |  |   | (87    | ) |  |   | (51     | )
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|Remaining reserve at December 31, 2003            |  | $                                        | 42     |   |                          | $ | -0-     |                  |  | $ | 754    |   |  | $ | 796     |  
|2004 charge                                       |  |                                          |        |   |                          |   | 7,010   |                  |  |   |        |   |  |   | 7,010   |  
|Amounts utilized                                  |  |                                          |        |   |                          |   | (7,010  | )                |  |   |        |   |  |   | (7,010  | )
|Actual expenditures                               |  |                                          | 17     |   |                          |   |         |                  |  |   | (164   | ) |  |   | (147    | )
|Provisions and adjustments to prior reserves, net |  |                                          | (28    | ) |                          |   |         |                  |  |   | 464    |   |  |   | 436     |  
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  
|Remaining reserve at December 31, 2004            |  | $                                        | 31     |   |                          | $ | -0-     |                  |  | $ | 1,054  |   |  | $ | 1,085   |  
|                                                  |  |                                          |        |   |                          |   |         |                  |  |   |        |   |  |   |         |  



During the third
quarter of 2004, the Predecessor Company recorded a $5.695 million pre-tax asset impairment charge to further reduce the net book value of the Performance Minerals segments Specialty Minerals operations Velarde plant. The impairment indicator
was a temporary suspension of operations of the Velarde plant. The Velarde plant was written down to the estimated fair value based on current market offers.



In the second quarter of 2004, due to changes in facts and circumstances, the Predecessor Company recorded an adjustment to increase the Provision for
Restructuring, Asset Impairments and Early Retirement Programs by $500,000 for exit costs related to previously shutdown abrasives facilities.



In the first quarter of 2004, the Predecessor Company recorded a $1.315 million asset impairment charge related to the exit and sublease of the Cleveland
Marine Services office. Of this charge, $1.170 million was primarily related to the difference between base rent due until December 2009 and sublease income that will be received into March 2008. An additional $145,000 pre-tax charge was recorded to
write-off leasehold improvements abandoned at the Marine office.



During the second quarter of 2003, the Predecessor Company recorded a $13.114 million pre-tax asset impairment charge to reduce the net book value of the Performance Minerals segments Specialty Minerals operation to its estimated fair
value, as determined by management based on an independent third-party appraisal. The charge reduced the carrying value of the operations land, depreciable fixed assets and mineral reserves by $2.610 million, $2.334 million and $8.170 million,
respectively.



F-24



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Fair values were estimated using a discounted cash flow valuation technique incorporating a discount
rate commensurate with the risks involved for each group of assets. The remaining 2003 impairment charges of $158,000 were recorded in the fourth quarter to reduce the carrying value of certain idled equipment of the Global Stone segment.



During the fourth quarter of 2002, the Predecessor Company
recorded a $1.154 million pre-tax asset impairment charge to reduce the carrying value of certain idled fixed assets of the Performance Minerals and Global Stone segments to their estimated fair values based on expected future cash flows
(essentially zero). The impaired assets primarily represent machinery, equipment and land improvements that are currently idle and whose future operation is not integral to the long-term strategic direction of the Predecessor Company.



During 2002, the Predecessor Company sold non-strategic mineral processing
operations closed in conjunction with the 2001 restructuring with the excess of cash proceeds over carrying value of $959,000 being included in the provision for restructuring, asset impairments and early retirement programs in the Predecessor
Companys consolidated statement of operations.



NOTE ENET LOSS
PER SHARE



Net loss per share for the fiscal year ended
December 31, 2004 was calculated using the Predecessor Companys pre-petition common stock which was cancelled on the Effective Date pursuant to the Plan of Reorganization. The calculation of net loss per sharebasic and assuming dilution
follows (in thousands, except per share amounts):



|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  
|-------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                             |  | 2004 |          |   | 2003 |   |         | 2002 | 
|Average numbers of Predecessor Company shares outstanding:                                   |  |      |          |   |      |   |         |      |  |   |        |  
|Average number of shares outstandingbasic                                                   |  |      | 5,233    |   |      |   | 5,125   |      |  |   | 5,025  |  
|Dilutive effect of stock plans                                                               |  |      | -0-      |   |      |   | -0-     |      |  |   | -0-    |  
|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  
|Average number of shares outstandingassuming dilution                                       |  |      | 5,233    |   |      |   | 5,125   |      |  |   | 5,025  |  
|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss per sharebasic and assuming dilution:                                              |  |      |          |   |      |   |         |      |  |   |        |  
|Loss before cumulative effect of accounting change                                           |  | $    | (106,075 | ) |      | $ | (31,801 | )    |  | $ | (6,608 | )
|Cumulative effect of accounting change for asset retirement obligations, net of income taxes |  |      | -0-      |   |      |   | (1,391  | )    |  |   | -0-    |  
|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss                                                                                     |  | $    | (106,075 | ) |      | $ | (33,192 | )    |  | $ | (6,608 | )
|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  
|Loss before cumulative effect of accounting change                                           |  | $    | (20.27   | ) |      | $ | (6.21   | )    |  | $ | (1.32  | )
|Cumulative effect of accounting change for asset retirement obligations, net of income taxes |  |      | -0-      |   |      |   | (0.27   | )    |  |   | -0-    |  
|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  
|Net loss per sharebasic and assuming dilution                                               |  | $    | (20.27   | ) |      | $ | (6.48   | )    |  | $ | (1.32  | )
|                                                                                             |  |      |          |   |      |   |         |      |  |   |        |  



For the year ended
December 31, 2004 and 2003, zero and 313 common shares, respectively, that were issuable under stock compensation plans and could dilute earnings per share in the future were not included in earnings per share because to do so would have been
anti-dilutive.



F-25



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



NOTE FINCOME TAXES



Total income taxes differ from the tax computed by applying the U.S. federal corporate income tax statutory rate for the
following reasons (in thousands):



|                                         |  |      |          |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | 2004 |          |   | 2003 |   |         | 2002 | 
|Loss before income taxes                 |  | $    | (107,083 | ) |      | $ | (62,144 | )    |  | $ | (13,036 | )
|                                         |  |      |          |   |      |   |         |      |  |   |         |  
|Income taxes (benefit) at statutory rate |  | $    | (37,479  | ) |      | $ | (21,750 | )    |  | $ | (4,563  | )
|Tax differences due to:                  |  |      |          |   |      |   |         |      |  |   |         |  
|Percentage depletion                     |  |      | (4,852   | ) |      |   | (2,786  | )    |  |   | (2,503  | )
|State income taxes                       |  |      | (466     | ) |      |   | (476    | )    |  |   | 528     |  
|Favorable IRS settlement                 |  |      | -0-      |   |      |   | (5,332  | )    |  |   | -0-     |  
|Reorganization expenses                  |  |      | 27,370   |   |      |   | -0-     |      |  |   | -0-     |  
|Other                                    |  |      | 9        |   |      |   | 1       |      |  |   | 110     |  
|                                         |  |      |          |   |      |   |         |      |  |   |         |  
|                                         |  | $    | (15,418  | ) |      | $ | (30,343 | )    |  | $ | (6,428  | )
|Valuation allowance                      |  |      | 14,410   |   |      |   | -0-     |      |  |   | -0-     |  
|                                         |  |      |          |   |      |   |         |      |  |   |         |  
|Total income taxes (benefit)             |  | $    | (1,008   | ) |      | $ | (30,343 | )    |  | $ | (6,428  | )
|                                         |  |      |          |   |      |   |         |      |  |   |         |  



Because of the
Predecessor Companys continued net losses, the total income tax benefit is all recorded as deferred taxes on the consolidated statement of operations.



As of the Effective Date, the Reorganized Company has net operating loss carry forwards for tax purposes of $100.859 million, which expire in 2020, 2021,
2022, 2023 and 2024. Due to the change in control of the Company, Internal Revenue Code Section 382 will limit the utilization of these net operating loss carry forwards on an annual basis, resulting in the need for a valuation allowance for book
purposes.



During calendar year 2003, the Predecessor Company
experienced a favorable conclusion to the audit of its federal income tax returns. This favorable settlement of $5.332 million is included in the Predecessor Companys consolidated statement of operations as a current income tax benefit.



The Predecessor Company received income tax refunds of
$19,000, $3,000 and $7.855 million in 2004, 2003 and 2002, respectively. The Predecessor Company made income tax payments of $263,000, $78,000 and $28,000 in 2004, 2003, and 2002, respectively.



F-26



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Predecessor and Reorganized Companys deferred tax liabilities and assets are as follows (in
thousands):



|                                                                  |  |                          |        |   |                          |   |       
|----------------------------------------------------------------- |  | ------------------------ | ------ | - | ------------------------ | - | ------
|                                                                  |  | December 31             
|                                                                  |  | Reorganized Company 2004 |        |   | Predecessor Company 2003
|Deferred tax liabilities:                                         |  |                          |        |   |                          |   |       
|Tax over book depreciation, depletion, amortization and Accretion |  | $                        | 83,196 |   |                          | $ | 72,363
|Pension benefits                                                  |  |                          | 406    |   |                          |   | 14,215
|Other                                                             |  |                          | 4,254  |   |                          |   | 10,863
|                                                                  |  |                          |        |   |                          |   |       
|Total deferred tax liabilities                                    |  |                          | 87,856 |   |                          |   | 97,441
|Deferred tax assets:                                              |  |                          |        |   |                          |   |       
|Postretirement benefits                                           |  |                          | 24,586 |   |                          |   | 16,817
|Coal Act liability                                                |  |                          | 2,694  |   |                          |   | 2,581 
|Alternative minimum tax credit carry-forward                      |  |                          | 4,810  |   |                          |   | 4,810 
|Net operating loss carry-forward                                  |  |                          | 35,809 |   |                          |   | 55,190
|Restructuring, asset impairments and early retirement programs    |  |                          | 7,721  |   |                          |   | 5,408 
|Interest rate hedge contracts                                     |  |                          | (97    | ) |                          |   | 381   
|Minimum pension liability adjustments                             |  |                          | -0-    |   |                          |   | 2,412 
|Deferred financing expenses                                       |  |                          | 5,088  |   |                          |   | -0-   
|Other                                                             |  |                          | 8,398  |   |                          |   | 9,147 
|                                                                  |  |                          |        |   |                          |   |       
|Total deferred tax assets                                         |  |                          | 89,009 |   |                          |   | 96,746
|Valuation allowance                                               |  |                          | 3,039  |   |                          |   | -0-   
|                                                                  |  |                          |        |   |                          |   |       
|Net deferred tax liabilities                                      |  | $                        | 1,886  |   |                          | $ | 695   
|                                                                  |  |                          |        |   |                          |   |       



NOTE GLONG-TERM DEBT and
OTHER FINANCIAL INSTRUMENTS



A summary of the Predecessor
and Reorganized Companys long-term debt is as follows (in thousands):



|                                           |  |                          |         |                          |   |        
|------------------------------------------ |  | ------------------------ | ------- | ------------------------ | - | -------
|                                           |  | December 31             
|                                           |  | Reorganized Company 2004 |         | Predecessor Company 2003
|Second DIP Credit Facility                 |  | $                        | 250,000 |                          | $ | -0-    
|Pre-petition Credit Facility               |  |                          | -0-     |                          |   | 225,475
|Senior Secured Notes                       |  |                          | 89,783  |                          |   | 79,781 
|Senior Subordinated Notes                  |  |                          | -0-     |                          |   | 100,000
|Vessel Term Loan                           |  |                          | 12,537  |                          |   | 14,239 
|Notes and Bonds payable and capital leases |  |                          | 873     |                          |   | 2,345  
|                                           |  |                          |         |                          |   |        
|                                           |  |                          | 353,193 |                          |   | 421,840
|Less current portion                       |  |                          | 342,166 |                          |   | 420,350
|                                           |  |                          |         |                          |   |        
|                                           |  | $                        | 11,027  |                          | $ | 1,490  
|                                           |  |                          |         |                          |   |        



In fresh-start
reporting the Companys Senior Subordinated Notes were converted to issuable common shares.



F-27



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Subsequent Events



Post-emergence credit facility.    On the Effective Date, the Company and each of its
wholly-owned direct and indirect subsidiaries entered into a debt agreement with a syndicate of financial institutions (the post-emergence credit facility). The Company and the majority of its significant operating companies are
borrowers under the post-emergence credit facility, and the remaining subsidiaries guarantee the obligations under the post-emergence credit facility. The maturity date of the obligations under the post-emergence credit facility is January 30, 2010
or such earlier date as prescribed in the post-emergence credit facility. Interest is payable on the outstanding loans monthly in arrears on the first day of each month. As of January 31, 2005, the Company had total outstanding indebtedness of $261
million under the post-emergence credit facility, comprised of revolving loans, a term loan A and a term loan B as described below.



The term loan A has an initial principal amount of $105 million. The term loan A bears interest at a floating rate linked to the prime rate or LIBOR, at
the Companys option. The term loan A, or such portion as the Company may elect, linked to LIBOR bears interest at the greater of 6.00% or LIBOR plus 4.00%, and such portion of the term loan A as the Company may elect to be linked to the prime
rate bears interest at the greater of 6.00% or the prime rate plus 1.50%. Principal payments are due in 47 consecutive monthly installments of $875,000, with the first payment due in January 2006, and with a final installment of the remaining
outstanding principal due on the maturity date of the post-emergence credit facility.



The term loan B has an initial principal amount of $150 million. The term loan B bears interest at a floating rate linked to the prime rate or LIBOR, at the Companys option. The term B loan, or such portion as
the Company may elect, linked to LIBOR bears interest at the greater of 12.25% or LIBOR plus 10.25%, and such portion of the term loan B as the Company may elect to be linked to the prime rate, bears interest at the greater of 14.25% or the prime
rate plus 9.75%. The outstanding principal of the term loan B is due on the maturity date of the post-emergence credit facility.



The revolving loans available under the post-emergence credit facility are in an aggregate principal amount not to exceed $55 million (including a
sublimit of $20 million for issuance of letter of credit accommodations), with an additional $10 million in revolving loans permitted, subject to availability requirements under the post-emergence credit facility, from March through September 2005.
Principal amounts of the revolving facility that the Company repays may be reborrowed in accordance with the terms of the post-emergence credit facility. The revolving loans under the post-emergence credit facility bear interest at a floating rate
linked to the prime rate or LIBOR, at the Companys option. Revolving loans linked to the prime rate bear interest at the greater of 5.50% or the prime rate plus 1.00%, and revolving loans linked to LIBOR bear interest at the greater of 5.50%
or LIBOR plus 3.50%. As of January 31, 2005, $3.0 million was outstanding under the revolving credit facility, excluding $11.4 million in letter of credit accommodations.



The Company and its subsidiaries are subject to affirmative and negative covenants under the post-emergence credit facility,
including periodic financial reporting. The Company is also subject to quarterly financial covenants, including minimum consolidated earnings before interest, taxes, depreciation and amortization, which is known as EBITDA, and fixed charge coverage
ratio tests measured for each period of four consecutive fiscal quarters and an annual covenant on the maximum amount of capital expenditures.



Long-Term Debt at December 31, 2004 and 2003



At December 31, 2004, the Reorganized Company was party to a debtor-in-possession credit facility which automatically converted into the post-emergence
credit facility on the Effective Date, a vessel term loan, a Senior Secured Notes agreement and a Senior Subordinated Note agreement that was converted to issuable common shares as part of the Plan of Reorganization



F-28



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



On April 30, 2004, the Bankruptcy Court entered an order authorizing the Debtors to enter into a $305
million second DIP credit facility providing the Predecessor Company with post-petition financing. The Bankruptcy Court also authorized the Predecessor Company to pay certain commitment fees and other expenses related to this loan. The second DIP
credit facility was consummated on July 15, 2004. The second DIP credit facility was used to repay borrowings under the first DIP credit facility and the existing pre-petition bank credit facility and provided a revolving credit facility for working
capital while the Predecessor Company was in Chapter 11. During 2004, the Predecessor Company incurred $11.053 million in deferred financing costs, which included the commitment fees and professional fees related to the second DIP credit facility.
Upon confirmation of the Reorganized Companys Plan and emergence from Chapter 11 on January 31, 2005, the $305 million second DIP credit facility was automatically converted to a five-year $310 million credit facility (plus a $10 million
additional amount from March to September 2005) to provide financing for the Reorganized Company.



At December 31, 2004, the Company had borrowings of $250 million under the second DIP credit facility. $125 million was a Term A and A-1 loan with a
variable interest rate of 6.46% and $125 million under a Term B loan with a variable interest rate of 12.21%.



The Predecessor Companys second DIP credit facility repaid the borrowings under the pre-petition bank credit facility. This credit facility included
a Syndicated Term Loan and Senior Credit Facility. The facility had a scheduled maturity of October 31, 2004 and the Predecessor Company violated various financial covenants. On September 11, 2003, the Predecessor Company entered into amendments
with its syndicated banking group and senior secured note holders. The Amendments required the Predecessor Company to repay at least $100 million of debt from the proceeds of permitted asset sales by February 25, 2004. As a result of the Predecessor
Companys decision to not repay $100 million in debt from proceeds of permitted asset sales by February 25, 2004, the Predecessor Company was in default of the Syndicated Term Loan, Senior Credit Facility, Senior Secured Notes, Senior
Subordinated Notes and Vessel Term Loan.



The second DIP credit
facility replaced the initial debtor-in-possession facility (initial DIP credit facility) that allowed the Predecessor Company to borrow up to $70 million and was approved by the Bankruptcy Court on April 8, 2004. During 2004, the
Predecessor Company incurred $2.841 million in deferred financing costs related to legal and professional fees related to the initial DIP credit facility.



As previously stated, the Reorganized Company issued and sold $85 million in convertible preferred stock pursuant to the rights offering and commitment
agreement on the Effective Date. The Reorganized Company used the net proceeds from the issuance and sale of the convertible preferred stock and available cash and borrowings under the post-emergence credit facility to redeem the 18% Senior Secured
Notes in the principal amount at December 31, 2004 of $84.677 million due October 25, 2008. These notes were redeemed at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance with the terms of the Senior Secured
Notes purchase agreement, dated October 25, 2002. The reinstatement at 106% was approved by the Bankruptcy Court and increased the principal balance to $89.783 million at December 31, 2004 for the Reorganized Company.



The Senior Secured Notes were funded on October 25, 2002 with a scheduled
amortization in 2007 and 2008. Interest on the notes included a 13% per annum cash payment, payable quarterly and a 6% payment-in-kind per annum rate that was accrued to the principal balance. This interest payment was suspended during the
bankruptcy, however it was paid in full on the Effective Date. The Predecessor Company had violated financial covenants with this agreement in 2003.



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



As previously discussed, the Reorganized Companys Plan of Reorganization included the
conversion of a $100 million principal amount of Senior Subordinated Notes plus accrued and unpaid interest into a pro-rata distribution of 2,928,571 shares of the Reorganized Companys common stock in full satisfaction of their claims.



The Predecessor Company was in default of its Subordinated
Note Agreement in September 2003 for deferring an interest payment in excess of its 30-day grace period. That default was cured in September 2003.



In 1997, the Predecessor Company entered into a $17 million fixed rate Vessel Term Loan with a bank to finance the acquisition of two Marine Services
vessels, which had previously been under charter agreements. The Vessel Term Loan contains covenants that match the $310 million post-emergence credit facility. During 2002, the Predecessor Company amended its agreement on this Vessel Term Loan to
establish new quarterly covenant levels that match the Senior Credit Facility and Syndicated Term Loan and agreed to a change in pricing. Semi-annual principal payments from January 15, 2005 through January 15, 2007 range from $920,000 to $1.055
million, increasing yearly; and a final principal payment of $7.650 million is due on July 15, 2007.



The loan is secured by mortgages on the two vessels, which have a net book value of $9.157 million at December 31, 2004. The Vessel Term Loan has a
semi-variable interest rate of 9.82% at December 31, 2004.



Including the two vessels pledged to the Vessel Term Loan, all of the Reorganized Companys U.S. accounts receivable, inventories and property and equipment, which approximate $549.122 million, secure long-term senior debt of $352.376
million at December 31, 2004.



In 2004, the Predecessor Company
incurred $13.894 million of deferred financing costs primarily related to the $75 million initial DIP and the $305 million second-DIP financing. In 2003, the Predecessor Company incurred $4.762 million of deferred financing costs primarily related
to the amendment of the Syndicated Term Loan, Senior Credit Facility and the Senior Secured Notes and waiver of covenant violations under the related agreements. In 2002, the Predecessor Company incurred $8.413 million of deferred financing costs
primarily related to the execution of the Senior Secured Notes transaction and amendment of the Senior Credit Facility and Syndicated Term Loan. Since, in each of the years, the modification to the anticipated cash flows resulting from the above
described amendment activity was not considered significant to cash flows of the related debt or represented new debt, the deferred financing costs were included in other assets on the consolidated balance sheet and were amortized over the term of
the respective agreements. As part of the fair value adjustments in Fresh-Start reporting, these deferred financing fees were charged to reorganization items, net.



The Reorganized Company has stand-by letters of credit totaling $12.1 million at December 31, 2004, with no balance
outstanding at December 31, 2004. The stand-by letters of credit expire on May 15, 2005 ($2.0 million) and June 15, 2005 ($10.1 million).



Although nearly all of the Predecessor Companys debt is classified as current due to the defaults discussed above, stated long-term debt maturities
are $342.166 million in 2005 (the Reorganized Companys DIP Loans expire in 2005 and were refinanced at emergence and the Senior Secured Notes were paid in 2005 pursuant to the Plan), $2.128 million in 2006, $8.796 million in 2007 and $103,000
in 2008. The Predecessor Company made interest payments of $26.214 million, $47.921 million and $40.862 million during 2004, 2003 and 2002, respectively. In 2004, 2003 and 2002, the Predecessor Company included the 6%, 6% and 5%, respectively,
payment-in-kind interest related to the Senior Secured Notes interest expense on the Predecessor Companys consolidated statement of operations.



F-30



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



The Predecessor Company recognizes all derivative instruments on the consolidated balance sheet at
fair value. The Predecessor Companys syndicated banking group had required interest rate protection on fifty-percent of the Predecessor Companys Senior Credit Facility and Syndicated Term Loan, prior to their amendment during the third
quarter of 2003. Accordingly, the Predecessor Company entered into interest rate swap agreements during 2001 that effectively converted a portion of its floating-rate debt to a fixed-rate basis, thus reducing the impact of interest-rate changes on
future interest expense. The Predecessor Companys final swap expired on June 30, 2004.



On January 1, 2001, the Predecessor Company entered into interest rate swap agreements with an aggregate notional value of $220 million. At that time, interest rate swaps with a notional value of $50 million were
designated in cash flow hedge relationships in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, while interest rate swaps with a notional value of $170 million did not qualify as hedging
instruments.



For the interest rate swaps with a notional value
of $50 million that were designated in cash flow hedge relationships on January 1, 2001, the effective portion of the changes in fair value of the swaps was recorded in other comprehensive loss, a component of stockholders equity. At December
31, 2002, the Predecessor Company undesignated one of these interest rate swaps with a notional value of $20 million, since the Predecessor Companys outstanding variable rate debt at that time was less than the $220 million aggregate notional
value. Changes in the fair value of the undesignated interest rate swap after December 31, 2002 were recognized in interest expense. These interest rate swaps expired on April 3, 2003 and were not replaced by the Predecessor Company.



For the interest rate swaps with a notional value of $170 million that did
not qualify as hedging instruments on January 1, 2001, a pre-tax transition adjustment of $4.623 million ($2.82 million net of income taxes) was recorded in other comprehensive loss. The transition adjustment was amortized to interest expense over
ten quarters, ending June 30, 2003. The pre-tax charge to interest expense for the year ended December 31, 2004 was zero and was $925,000 and $1.849 million for the years ended December 31, 2003 and 2002.



The Predecessor Company amended all of the interest rate swap agreements that
did not qualify as hedging instruments at the end of the first quarter 2001. The amended interest rate swaps were then designated in cash flow hedge relationships. Beginning in the second quarter of 2001, the amended interest rate swap agreements
effective portion of the changes in fair value was recorded in other comprehensive loss. On December 31, 2003 and June 30, 2003, certain of these interest rate swaps with an aggregate notional value of $70 million and $50 million, respectively,
expired. These swaps were not replaced by the Predecessor Company.



At December 31, 2003, the Predecessor Company had one such interest rate swap remaining with a notional value of $50 million, which expired June 30, 2004. The Company includes the liability for derivative instruments in other long-term
liabilities on the Predecessor Companys consolidated balance sheet. The liability for derivative instruments was zero and $1.457 million at December 31, 2004 and 2003, respectively.



The Predecessor Company recognized a pre-tax gain of $17,000 in 2004 and pre-tax losses of $64,000 and $7,000 in 2003 and
2002, respectively, related to the ineffective portion of its hedging instruments and these amounts are included in other expense on the Predecessor Companys consolidated statement of operations.



When using interest rate swap agreements, the intermediaries to such
agreements exposed the Predecessor Company to the risk of nonperformance, though such risk was not considered likely under the circumstances. The Predecessor Company did not hold or issue financial instruments for trading purposes.



F-31



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



The estimated fair values of long-term debt and other financial instruments outstanding at December
31 are as follows (in thousands):



|                                          |  |                     |  |                     |         |            |   |                |  |                |        |            |   |         |  |   |        
|----------------------------------------- |  | ------------------- |  | ------------------- | ------- | ---------- | - | -------------- |  | -------------- | ------ | ---------- | - | ------- |  | - | -------
|                                          |  | Reorganized Company |  | Predecessor Company
|                                          |  | 2004                |  | 2003               
|                                          |  | NotionalAmount      |  | CarryingAmount      |         | Fair Value |   | NotionalAmount |  | CarryingAmount |        | Fair Value
|Cash                                      |  |                     |  | $                   | 17,694  |            |   |                |  |                |        |            | $ | 1,137   |  |   |        
|Long-term debt, including current portion |  |                     |  | $                   | 353,193 |            | $ | 353,193        |  |                |        |            | $ | 421,840 |  | $ | 361,699
|Interest rate swap liability:             |  |                     |  |                     |         |            |   |                |  |                |        |            |   |         |  |   |        
|Variable to fixed                         |  |                     |  |                     |         |            |   |                |  | $              | 50,000 |            |   | 1,457   |  |   | 1,457  



The estimated fair
values of financial instruments are principally based on quoted market prices and by discounting future cash flows at currently available interest rates for borrowing arrangements with similar terms.



NOTE HSTOCKHOLDERS EQUITY



General



The Reorganized Companys Second Amended and Restated Articles of Incorporation authorize the Company to issue
90,000,000 shares of common stock. On the Effective Date, 2,928,571 shares of common stock (excluding 264,837 of restricted shares issued under the Management Stock Plan and 404,071 of warrants exercised in the first quarter of 2005) were issued and
outstanding, all of which were issued pursuant to the Plan. The Reorganized Companys Second Amended and Restated Articles of Incorporation also authorize the Reorganized Company to issue 30,000,000 shares of convertible preferred stock, $0.01
par value per share (convertible preferred stock), in one or more series, with such rights and restrictions and with such additional provisions as the Board of Directors may determine, including, among other things, voting, dividend,
redemption, sinking fund, liquidation and conversion rights, and additional restrictions. The convertible preferred stock constitutes a series of the preferred stock, and, as of the Effective Date, 8,500,000 shares of convertible preferred stock
were issued and outstanding.



Subject to the terms of the
convertible preferred stock, the Board of Directors has broad discretion with respect to the creation and issuance of preferred stock without shareholder approval. The rights, preferences and privileges of holders of the common stock may be
adversely affected by the holders of shares of any other series of preferred stock that the Reorganized Company may designate and issue from time to time. Among other things, by authorizing the issuance of other shares of preferred stock with
particular conversion, redemption, voting or other rights, the Board of Directors could adversely affect the voting power of the holders of the common stock and could discourage any attempt to effect a change in control of the Reorganized Company
even if such a transaction would be beneficial to the interests of the shareholders.



Common Stock



The Reorganized Company is
authorized to issue 90,000,000 shares of common stock of which:



| |  |  | 2,928,571 shares were distributed to holders of Senior Subordinated Note claims on the Effective Date;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | 17,331,341 shares were reserved for issuance upon conversion of the convertible preferred stock (which number consists of (1) 8,500,000 shares initially reserved for issuance upon
conversion of the 8,500,000 shares of convertible preferred stock issued on the Effective Date, plus (2) additional shares reserved for issuance as a result of the accretion of dividends thereon through January 31, 2010, which is the fifth
anniversary of the Effective Date);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



| |  |  | an aggregate of 576,256 shares were reserved for issuance upon the exercise of warrants, of which 404,071 were exercised through March 2, 2005, the expiration date of the warrants;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 1,328,049 shares were reserved for issuance under the management stock plan of which 264,837 were awarded as restricted shares on the Effective Date.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



The 2,928,571 shares of common stock and the 8,500,000 shares of convertible
preferred stock issued and outstanding on the Effective Date represent approximately 25.6% and 74.4%, respectively, of the total voting power of and equity interests in the Company (before giving effect to the issuance of the shares of common stock
reserved for issuance upon the exercise of the warrants, as described above).



In addition to the common stock issued pursuant to the Plan, the Reorganized Company is also authorized to issue additional shares of common stock from time to time under the provisions of its Second Amended and
Restated Articles of Incorporation, its amended and restated code of regulations and applicable law. The holders of the common stock will be entitled to one vote for each share held of record on all matters submitted to a vote of shareholders,
except for the election of Directors or as otherwise limited by the terms of the convertible preferred stock or any other class of preferred stock issued after the Effective Date of the Plan.



Subject to the terms of the convertible preferred stock or any other class of
preferred stock issued after the Effective Date of the Plan, holders of the common stock will be entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available for payment of dividends. The
Reorganized Company is required, subject to restrictions, to pay dividends on the convertible preferred stock, but the Reorganized Company has not paid and does not anticipate paying dividends on the common stock, and may be limited in its ability
to pay dividends on the convertible preferred stock. In the event of a liquidation, dissolution or winding up of the Reorganized Company, holders of the common stock will be entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any issuances of preferred stock, including the convertible preferred stock. Holders of the common stock have no preemptive, subscription, redemption or conversion rights.



Convertible Preferred Stock



As discussed above, pursuant to the Reorganized Companys Second
Amended and Restated Articles of Incorporation, the Reorganized Company was authorized to issue 8,500,000 shares of convertible preferred stock pursuant to the rights offering and the commitment agreement.



Ranking.    The convertible preferred stock ranks,
with respect to dividend rights and rights upon our liquidation, winding-up or dissolution, senior to the common stock and, except as otherwise approved by the holders of a majority of the outstanding shares of convertible preferred stock or
contemplated by the terms of the convertible preferred stock, all other classes of capital stock or series of preferred stock established by the Company on the Effective Date (junior stock). The rights of the holders of convertible
preferred stock, however, are subordinate to the rights of the lenders under the post-emergence credit facility, other holders of the Companys indebtedness and other general creditors.



Dividend Rights.    Holders of the convertible
preferred stock are entitled to receive out of the Reorganized Companys assets legally available for payment, when, as and if declared by the Board of Directors, preferential dividends on the then effective liquidation preference, payable
quarterly, at an annual rate of 14.8275%. Until January 31, 2008, which is the third anniversary of the Effective Date, dividends, whether or not authorized and declared by the Board of Directors, will be deemed paid by accreting and adding the
amount of the per share



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



dividend to the then effective liquidation preference of each share of convertible preferred stock. After that date, dividends will be payable in cash,
unless the Reorganized Company is prohibited under statutory law, or by the terms of the post-emergence credit facility, or any credit facility or security refinancing the post-emergence credit facility, from paying cash dividends, in which case the
dividends will be deemed paid by accreting and adding the amount of the per share dividend to the then effective liquidation preference. Dividends on the convertible preferred stock are cumulative.



In addition to the dividends provided above, holders of the convertible
preferred stock are entitled to receive an additional dividend in an amount equal to the amount by which the aggregate amount of dividends that would have been received by holders of the convertible preferred stock in any dividend period if the
holders convertible preferred stock had been converted at the beginning of such dividend period into shares of common stock at the conversion price exceeds the aggregate convertible preferred stock dividend amount accrued or received in such
dividend period described in the paragraph above. However, any dividend for which an adjustment in the conversion price of the convertible preferred stock is made pursuant to the applicable antidilution provisions will not be deemed a dividend or
otherwise give rise to any rights under this paragraph. Any such additional dividends are payable to the holders of convertible preferred stock in the form of cash.



Dividends on the applicable liquidation preference of a share of the convertible preferred stock are payable quarterly, in
arrears, on the last day of March, June, September and December of each year, starting March 31, 2005. Dividends are payable from the most recent dividend payment date or, in the case of the dividend payable on March 31, 2005, from January 31, 2005,
which was the convertible preferred stock issue date. Dividends payable on the convertible preferred stock for any period less than a full quarterly dividend period are computed on the basis of a 360-day year consisting of twelve 30-day months.
Dividends payable on the convertible preferred stock for each full dividend period are computed by dividing the annual dividend rate by four. Each declared dividend is payable to holders of record as they appear on the Reorganized Companys
stock records at the close of business on the 15th day prior to the relevant dividend payment date. Regular quarterly dividend periods start on and include the last day of March, June, September and December, of each year and end on and include the
date before the next dividend payment date.



The Reorganized
Companys ability to pay cash dividends is constrained by contractual limitations and may be constrained by statutory limitations in the future. The Reorganized Company has not paid and does not anticipate paying dividends on the common stock,
and may be limited in its ability to pay dividends on the convertible preferred stock.



Conversion Rights.    A holder of the convertible preferred stock has the right, at his or her option, to convert any or all of his or her shares of convertible preferred stock into the
number of shares of common stock obtained by dividing the aggregate then effective liquidation preference of the shares of convertible preferred stock being converted by the conversion price. The initial conversion price equals $10 and is subject to
adjustment upon the occurrence of the events described below.



If a holder of shares of convertible preferred stock exercises conversion rights, those shares will cease to accumulate dividends as of the end of the day immediately preceding the date of conversion. Holders of shares of convertible
preferred stock who convert their shares into common stock will not be entitled to, nor will the conversion rate be adjusted for, any accrued and unpaid dividends. Instead, accrued dividends, if any, will be cancelled. Accordingly, shares of
convertible preferred stock converted after the close of business on any record date for the payment of dividends declared and before the opening of business on the dividend payment date relating to that record date must be accompanied by a payment
in cash of an amount equal to the dividend payable in respect of those shares for the dividend period in which the shares are converted, whether paid in cash



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



or by accretion of the liquidation preference. A holder of shares of convertible preferred stock on a dividend payment record date who converts such shares
into common stock on the corresponding dividend payment date will be entitled to receive the dividend payable on such shares of convertible preferred stock on such dividend payment date, and the converting holder need not include payment of the
amount of such dividend upon such conversion.



Redemption.    Shares of convertible preferred stock are not subject to redemption prior to January 31, 2006, which is the first anniversary of the Effective Date. On or after January 31, 2006, the shares of
convertible preferred stock will be redeemable at our option, in whole or in part, at any time or from time to time, out of funds legally available for payment.



Voting Rights.    Each holder of the convertible preferred stock is entitled to the number of votes equal to the number of
shares of the common stock into which shares of convertible preferred stock so held could be converted at the record date for determination of the shareholders entitled to vote, or, if no such record date is established, at the date such vote is
taken or any written consent of shareholders is solicited. Except as required by law or as otherwise set forth below, all shares of convertible preferred stock and all shares of common stock will vote together as a single class on all matters to
come before our shareholders. Fractional votes by the holders of convertible preferred stock are not permitted, and any fractional voting rights (after aggregating all shares into which shares of convertible preferred stock held by each holder could
be converted) are disregarded.



Liquidation
Preference.    In the event of the Reorganized Companys voluntary or involuntary liquidation, dissolution or winding up after payment or provision for payment of debts and other liabilities, holders of outstanding
shares of convertible preferred stock will be entitled to be paid out of the Companys assets available for distribution to shareholders (and before any distribution of assets is made to the holders of common stock or any junior stock as to
distributions), $10 per share of convertible preferred stock as adjusted by accreting and adding any dividends on those shares not paid by cash, in accordance with the terms of the convertible preferred stock, plus the amount of any accrued and
unpaid dividends, to the date fixed for liquidation, dissolution or winding up.



Upon any liquidation, dissolution or winding up of the Reorganized Company, the holders of shares of the convertible preferred stock will be entitled to receive the greater of (1) such liquidation preference, plus the
amount of any accrued and unpaid dividends, to the date fixed for liquidation, dissolution or winding up, and (2) the amounts that such holders would have received if all of the then outstanding shares of the convertible preferred stock had been
converted into common stock immediately prior to such liquidation, dissolution or winding up.



If the assets to be distributed among the holders of convertible preferred stock will be insufficient to permit the payment to such shareholders of the full preferential amounts thereof, all distributions made with
respect to the convertible preferred stock in connection with any liquidation, dissolution or winding up will be made pro rata to the holders of the convertible preferred stock.



Preemptive Rights.    No holder of any shares of convertible preferred stock has any preemptive
right to subscribe for stock, obligations, warrants or other securities of any class, whether now or authorized in the future.



Warrants



Terms of the Warrants.    Under the Plan, each record holder of the Predecessor Companys old common stock as of the close
of business on November 17, 2004 received one warrant for each share of the old common stock then held. Each warrant represented the right to purchase one-tenth (1/10th) of a share of Reorganized



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Company common stock. The warrants entitled their holder to purchase at an exercise price of $10 per share of Reorganized Company common stock one share of
common stock for each 10 warrants held. Except in the case where a holder exercised all warrants held by such holder, shares of Reorganized Company common stock can be purchased only pursuant to the exercise of warrants in multiples of 10.



The warrants were only exercisable by their holders until
March 2, 2005 at the exercise price of $10 per share. Each warrant that was not exercised before such time became void, and all rights of the holder in respect of such warrant ceased on March 2, 2005. Of the 576,256 shares reserved for the issuance
of warrants, 404,071 were exercised for $4.04 million in the first quarter of 2005.



Stock Options



1,328,049 shares of Reorganized
Company common stock are reserved for issuance upon the exercise of options to be issued under the management stock plan. The Predecessor Company filed a registration statement under the Securities Act to register shares reserved for issuance under
the management stock plan. Shares issued under this plan or upon exercise of outstanding options after the effective date of that registration statement, other than shares held by affiliates, which will be subject to certain limitations on resale
under Rule 144, generally will be tradable without restriction under the Securities Act, subject to vesting restrictions, and Section 16, if applicable. On the Effective Date, 397,255 stock options were awarded of which 132,418 vested immediately on
the grant date.



NOTE ICOMPANY STOCK PLANS



The Predecessor Company established the Oglebay Norton Company 1999
Long-Term Incentive Plan (1999 LTIP) on October 3, 1998, which was approved by the shareholders at the 2000 Annual Meeting. The predecessor to the Organization and Compensation Committee administered the 1999 LTIP and selected officers and other key
employees to participate in the plan. Under the 1999 LTIP, participants were eligible to be granted stock options and cash incentive payment awards. Under outstanding stock option awards, a participant had a right to purchase a specified number of
shares, during a specified period, and at a specified exercise price, all as determined by the predecessor to the Organization and Compensation Committee. No further stock option awards may be made under the 1999 LTIP. Cash incentive payment awards
were made for 2002. No further cash awards can be earned or paid. The 1999 LTIP was terminated by the Board of Directors in 2004 and all outstanding stock options issued under the 1999 LTIP were cancelled pursuant to the Plan.



The Predecessor Company established a long-term incentive plan (Former LTIP)
on December 13, 1995, which was approved by the Predecessor Companys shareholders at the 1996 Annual Meeting. The predecessor to the Organization and Compensation Committee administered the former LTIP and selected officers and other key
employees to participate in the plan. Under the former LTIP, participants were eligible to be granted awards, as determined by the predecessor to the Organization and Compensation Committee and, up to 1998, were eligible to defer a portion of their
annual incentive awards. Rochelle F. Walk held options granted under the former LTIP. Included in Additional Capital at December 31, 2004 and 2003 is zero and $82,000, respectively, for obligations under the LTIP, representing zero and 3,204
share units, respectively. Share units are calculated by taking the deferred payments and dividing by the stock market price on the deferral date. There was no compensation expense under the LTIP in 2004, 2003 or 2002. No
further awards may be made under the former LTIP. The former LTIP and all outstanding stock options issued under the former LTIP were cancelled pursuant to the Plan.



In connection with an employment agreement (Agreement), the Predecessor Company granted a restricted common stock award, in
lieu of annual cash compensation, to its former Chairman and Chief Executive Officer



F-36



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



(former Chairman). In 1998, upon the former Chairmans completion of a $1 million personal investment in the Predecessor Companys common stock,
the Predecessor Company issued to the former Chairman 25,744 shares of common stock equal to the number of shares of common stock he acquired.



These shares vested ratably over the vesting period with the final shares becoming vested on January 1, 2003. The former Chairman was entitled to all
voting rights and any dividends on the restricted shares.



Total compensation expense of $965,000, computed based on the closing market price on the date the stock was issued, was recognized over the vesting period. Compensation expense related to this award was zero in 2004 and 2003 and $97,000 in
2002. Also, under the Agreement, the Predecessor Company granted the former Chairman an option to acquire 380,174 common shares at an exercise price of $38.00 per share. The option became exercisable in whole or in part on January 1, 2001 and was
cancelled pursuant to the Plan.



In connection with a 2002
amendment to the Agreement (Amended Agreement), the Predecessor Company provided the former Chairman with a restricted common stock award of 25,000 shares, in lieu of annual cash compensation. The 25,000 shares were issued to the former
Chairman on January 2, 2003. The shares were fully vested upon issuance; however, the former Chairman was restricted from selling the shares until such time that his tenure as Chairman of the Board of Directors was ended. Total compensation expense
of $324,000, computed based on the closing market price on the effective date of the 2002 amendment, was recognized over the term of the former Chairmans employment under the amended agreement. Compensation expense related to this award was
zero in 2004 and $162,000 in 2003 and 2002.



The Predecessor
Company sponsored a Director Fee Deferral Plan (Directors Plan), which allowed non-employee Directors of the Company the option of deferring all or part of their fees in the form of share units or deferred cash. Any fees
deferred as share units were matched at 25% by the Predecessor Company, but only in the form of additional share units. Included in additional capital at December 31, 2004 and 2003 is zero and $1.149 million, respectively, of
obligations under the Directors Plan, representing zero and 147,839 share units, respectively. Expense under the Directors Plan was $30,000, $294,000 and $308,000 in 2004, 2003 and 2002, respectively. The Director Fee Deferral Plan was
terminated effective as of May 1, 2004. Upon termination, in accordance with the terms of the Director Fee Deferral Plan, deferred share units were converted into shares of Predecessor Companys common stock and distributed to participants.
Such participants who held shares of record of the old common stock as of the close of business on the warrant distribution record date received warrants in connection with the Plan, exercisable until March 2, 2005, to purchase shares of Reorganized
Company common stock.



1,328,049 shares of Reorganized Company
common stock are reserved for issuance upon the exercise of options to be issued under the management stock plan. On the Effective Date, 397,255 stock options were awarded of which 132,418 vested immediately on the grant date. The awards that vested
immediately were recognized as part of reorganization items in the Companys Fresh-Start adjustments. These options had a legal effective date of January 31, 2005. They have an exercise price of $12.63 per share. The fair value of these shares
was calculated at $3.68 per option.



The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 4.5%; dividend yields of 0.0%; volatility factors of the expected market price of the
Companys common shares of 23%; and a weighted-average expected life of ten years for the options. Since changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of its employee stock options.



F-37



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



A summary of the Predecessor Companys stock option activity and related information follows:



|                                       |  |                  |   |  |                                 |       |                            |   |     
|-------------------------------------- |  | ---------------- | - |  | ------------------------------- | ----- | -------------------------- | - | ----
|                                       |  | Number of Shares |   |  | Weighted Average Exercise Price |       | Weighted Average FairValue
|Options outstanding, December 31, 2001 |  | 654,224          |   |  | $                               | 31.05 |                            |   |     
|Granted                                |  | 128,750          |   |  |                                 | 9.50  |                            | $ | 4.65
|Forfeited                              |  | (35,250          | ) |  |                                 | 20.33 |                            |   |     
|                                       |  |                  |   |  |                                 |       |                            |   |     
|Options outstanding, December 31, 2002 |  | 747,724          |   |  | $                               | 27.84 |                            |   |     
|Granted                                |  | 120,500          |   |  |                                 | 2.04  |                            | $ | 1.81
|Forfeited                              |  | (29,400          | ) |  |                                 | 20.05 |                            |   |     
|                                       |  |                  |   |  |                                 |       |                            |   |     
|Options outstanding, December 31, 2003 |  | 838,824          |   |  | $                               | 24.41 |                            |   |     
|Granted                                |  | -0-              |   |  |                                 | -0-   |                            |   | -0- 
|Forfeited                              |  | (22,450          | ) |  |                                 | 12.18 |                            |   |     
|Cancelled                              |  | (816,374         | ) |  | $                               | 24.74 |                            |   |     
|                                       |  |                  |   |  |                                 |       |                            |   |     
|Options outstanding, December 31, 2004 |  | -0-              |   |  |                                 | -0-   |                            |   |     
|                                       |  |                  |   |  |                                 |       |                            |   |     
|Options exercisable, December 31, 2004 |  | -0-              |   |  |                                 | -0-   |                            |   |     
|                                       |  |                  |   |  |                                 |       |                            |   |     



There were 1,518,174
common shares authorized for awards and distribution under all of the Company stock plans. There were no options granted in 2004. At the end of 2004, 293,858 shares remained available for use for the above plans, however, all options and shares were
subsequently cancelled pursuant to the Reorganization Plan.



The fair value for Predecessor Company options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates ranging from 2.8%-6.4%; dividend yields
ranging from 0.0%-4.2%; volatility factors of the expected market price of the Companys common shares of 138% and 53% in 2003 and 2002, respectively; and a weighted-average expected life of four years for the options. Since changes in the
subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.



NOTE JPOSTRETIREMENT BENEFITS



The Reorganized Company has a number of noncontributory defined benefit
pension plans covering certain employee groups. The plans provide benefits based on the participants years of service and compensation, or stated amounts for each year of service. The Reorganized Companys funding policy is to contribute
amounts to the plans sufficient to meet the minimum funding required by applicable regulations. In addition to pension benefits, the Reorganized Company provides health care and life insurance for certain retired employees. The Reorganized
Companys policy is to fund these postretirement benefit costs principally on a cash basis as claims are incurred. The Coal Industry Retiree Health Benefit Act of 1992 (Coal Act) requires companies that previously mined coal to pay the cost of
certain health care benefit obligations for retired coal miners and their dependents. The charge for the Coal Act in 1992 was recorded as an extraordinary charge. In 2003, the Predecessor Company adopted SFAS No. 132 (SFAS No. 132);
Employers Disclosures about Pensions and Other Postretirement Benefits, which revised and expanded disclosures about pension plans other postretirement benefits. SFAS No. 132 did not change existing measurement or
recognition provisions.



F-38



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



A summary of the Companys pension and other benefits is as follows (in thousands):



|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|------------------------------------------------------------------ |  | ------------------------ | ------- | - | -------------------------- | - | ------ | ------------------------ |  | - | ------------------------ | - |  | ------------------------ | ------- | - | ------------------------ | - | ------ | - |  | - | ------ | -
|                                                                   |  |                          |         |   |                            |   |        | Other Benefits           | 
|                                                                   |  | Pension Benefits         |         |   | Postretirement Health Care |   |        | Coal Act                 | 
|                                                                   |  | 2004                     |         |   | 2003                       |   |        | 2004                     |  |   | 2003                     |   |  | 2004                     |         |   | 2003                     |  
|Change in benefit obligations:                                     |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Benefit obligations at beginning of year                           |  | $                        | 93,688  |   |                            | $ | 86,470 |                          |  | $ | 56,781                   |   |  | $                        | 52,501  |   |                          | $ | 6,617  |   |  | $ | 6,565  |  
|Service cost                                                       |  |                          | 2,601   |   |                            |   | 2,680  |                          |  |   | 1,742                    |   |  |                          | 1,420   |   |                          |   |        |   |  |   |        |  
|Interest cost                                                      |  |                          | 5,891   |   |                            |   | 5,835  |                          |  |   | 3,995                    |   |  |                          | 3,584   |   |                          |   | 409    |   |  |   | 436    |  
|Plan participant contributions                                     |  |                          | 17      |   |                            |   | 18     |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Amendments (prior service cost)                                    |  |                          | 74      |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Effect of Medicare subsidy                                         |  |                          |         |   |                            |   |        |                          |  |   | (7,325                   | ) |  |                          |         |   |                          |   |        |   |  |   |        |  
|Actuarial loss (gain)                                              |  |                          | 88      |   |                            |   | 2,639  |                          |  |   | 5,826                    |   |  |                          | (4,910  | ) |                          |   | (86    | ) |  |   |        |  
|Assumption changes                                                 |  |                          | 6,811   |   |                            |   | 3,994  |                          |  |   | 4,279                    |   |  |                          | 6,819   |   |                          |   | 291    |   |  |   | 317    |  
|Benefits paid                                                      |  |                          | (6,481  | ) |                            |   | (7,948 | )                        |  |   | (2,820                   | ) |  |                          | (2,633  | ) |                          |   | (325   | ) |  |   | (701   | )
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Benefit obligations at end of year                                 |  |                          | 102,689 |   |                            |   | 93,688 |                          |  |   | 62,478                   |   |  |                          | 56,781  |   |                          |   | 6,906  |   |  |   | 6,617  |  
|Change in plan assets:                                             |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Fair value of plan assets at beginning of year                     |  |                          | 87,964  |   |                            |   | 75,899 |                          |  |   | 277                      |   |  |                          | 252     |   |                          |   |        |   |  |   |        |  
|Actual return on plan assets                                       |  |                          | 7,503   |   |                            |   | 17,539 |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Employer contributions                                             |  |                          | 3,437   |   |                            |   | 2,456  |                          |  |   | 2,845                    |   |  |                          | 2,658   |   |                          |   |        |   |  |   |        |  
|Plan participant contributions                                     |  |                          | 17      |   |                            |   | 18     |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Benefits paid                                                      |  |                          | (6,481  | ) |                            |   | (7,948 | )                        |  |   | (2,820                   | ) |  |                          | (2,633  | ) |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Acquisitions                                                       |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Fair value of plan assets at end of year                           |  |                          | 92,440  |   |                            |   | 87,964 |                          |  |   | 302                      |   |  |                          | 277     |   |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Funded status                                                      |  |                          | (10,249 | ) |                            |   | (5,724 | )                        |  |   | (62,176                  | ) |  |                          | (56,504 | ) |                          |   | (6,906 | ) |  |   | (6,617 | )
|Unrecognized net actuarial loss                                    |  |                          | 41,280  |   |                            |   | 35,913 |                          |  |   | 9,134                    |   |  |                          | 7,241   |   |                          |   |        |   |  |   |        |  
|Unrecognized prior service cost (credit)                           |  |                          | 1,852   |   |                            |   | 2,117  |                          |  |   | (545                     | ) |  |                          | (786    | ) |                          |   |        |   |  |   |        |  
|Unrecognized initial net asset                                     |  |                          |         |   |                            |   | 77     |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Predecessor Company net asset (liability) recognized               |  | $                        | 32,883  |   |                            | $ | 32,383 |                          |  | $ | (53,587                  | ) |  | $                        | (50,049 | ) |                          | $ | (6,906 | ) |  | $ | (6,617 | )
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Fresh-Start fair value adjustment                                  |  |                          | (43,132 | ) |                            |   |        |                          |  |   | (8,589                   | ) |  |                          |         |   |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Reorganized Company net liability recognized                       |  | $                        | (10,249 | ) |                            |   |        |                          |  | $ | (62,176                  | ) |  |                          |         |   |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|                                                                   |  | Reorganized Company 2004 |         |   | Predecessor Company 2003   |   |        | Reorganized Company 2004 |  |   | Predecessor Company 2003 |   |  | Reorganized Company 2004 |         |   | Predecessor Company 2003 |  
|Amounts recognized in balance sheet consist of:                    |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Prepaid benefit cost                                               |  | $                        | 2,925   |   |                            | $ | 33,724 |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Intangible asset                                                   |  |                          | 0       |   |                            |   | 1,595  |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Prepaid pension costs                                              |  |                          | 2,925   |   |                            |   | 35,319 |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Accumulated other comprehensive income                             |  |                          | 0       |   |                            |   | 6,185  |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Accrued long-term benefit liability                                |  |                          | (13,174 | ) |                            |   | (9,121 | )                        |  | $ | (62,176                  | ) |  | $                        | (50,049 | ) |                          | $ | (6,906 | ) |  | $ | (6,617 | )
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Net asset (liability) recognized                                   |  | $                        | (10,249 | ) |                            | $ | 32,383 |                          |  | $ | (62,176                  | ) |  | $                        | (50,049 | ) |                          | $ | 6,906  | ) |  | $ | (6,617 | )
|                                                                   |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Weighted-average assumptions:                                      |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|To determine net periodic benefit cost for years ended December 31 |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Discount rate                                                      |  |                          | 6.50    | % |                            |   | 7.00   | %                        |  |   | 6.50                     | % |  |                          | 7.00    | % |                          |   | 6.50   | % |  |   | 7.00   | %
|Rate of compensation increase                                      |  |                          | 4.00    | % |                            |   | 4.00   | %                        |  |   | N/A                      |   |  |                          | N/A     |   |                          |   | N/A    |   |  |   | N/A    |  
|Expected return on plan assets                                     |  |                          | 9.00    | % |                            |   | 9.00   | %                        |  |   | 6.00                     | % |  |                          | 6.00    | % |                          |   | N/A    |   |  |   | N/A    |  
|To determine benefit obligations at December 31                    |  |                          |         |   |                            |   |        |                          |  |   |                          |   |  |                          |         |   |                          |   |        |   |  |   |        |  
|Discount rate                                                      |  |                          | 6.00    | % |                            |   | 6.50   | %                        |  |   | 6.00                     | % |  |                          | 6.50    | % |                          |   | 6.00   | % |  |   | 6.50   | %
|Rate of compensation increase                                      |  |                          | 4.00    | % |                            |   | 4.00   | %                        |  |   | N/A                      |   |  |                          | N/A     |   |                          |   | N/A    |   |  |   | N/A    |  



F-39



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



For purposes of measuring the accumulated postretirement benefit obligation for other postretirement
health care benefits, a 9.00% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2005. These rates are assumed to decrease gradually to 5.00% in 2009 and remain at those levels thereafter. For prescription
drug costs, a 12.25% annual rate of increase is assumed for 2005. This rate is assumed to decrease gradually to 6.00% in 2014 and remain at that level thereafter.



|                                         |  |                   |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | ----------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | Pension Benefits1 |       
|                                         |  | 2004              |        |   | 2003 |   |        | 2002 | 
|Components of net periodic benefit cost: |  |                   |        |   |      |   |        |      |  |   |        |  
|Service cost                             |  | $                 | 2,601  |   |      | $ | 2,680  |      |  | $ | 2,328  |  
|Interest cost                            |  |                   | 5,891  |   |      |   | 5,835  |      |  |   | 5,792  |  
|Expected return on plan assets           |  |                   | (7,881 | ) |      |   | (6,646 | )    |  |   | (8,301 | )
|Amortization of prior service cost       |  |                   | 339    |   |      |   | 332    |      |  |   | 322    |  
|Amortization of initial net asset        |  |                   | 1      |   |      |   | (1     | )    |  |   | (576   | )
|Recognized net actuarial loss (gain)     |  |                   | 1,909  |   |      |   | 2,381  |      |  |   | 631    |  
|Curtailment loss                         |  |                   | 76     |   |      |   |        |      |  |   |        |  
|                                         |  |                   |        |   |      |   |        |      |  |   |        |  
|Net periodic benefit cost                |  | $                 | 2,936  |   |      | $ | 4,581  |      |  | $ | 196    |  
|                                         |  |                   |        |   |      |   |        |      |  |   |        |  



|                                         |  |                            |       |   |          |   |       |      |  |   |       |   |      |   |      |  |   |     |  |   |      |  
|---------------------------------------- |  | -------------------------- | ----- | - | -------- | - | ----- | ---- |  | - | ----- | - | ---- | - | ---- |  | - | --- |  | - | ---- | -
|                                         |  | Other Benefits2            |      
|                                         |  | Postretirement Health Care |       |   | Coal Act |  
|                                         |  | 2004                       |       |   | 2003     |   |       | 2002 |  |   | 2004  |   | 2003 |   | 2002 | 
|Components of net periodic benefit cost: |  |                            |       |   |          |   |       |      |  |   |       |   |      |   |      |  |   |     |  |   |      |  
|Service cost                             |  | $                          | 1,742 |   |          | $ | 1,420 |      |  | $ | 1,264 |   |      |   |      |  |   |     |  |   |      |  
|Interest cost                            |  |                            | 3,995 |   |          |   | 3,584 |      |  |   | 3,438 |   |      | $ | 409  |  | $ | 436 |  | $ | 483  |  
|Expected return on plan assets           |  |                            | (16   | ) |          |   | (15   | )    |  |   | (12   | ) |      |   |      |  |   |     |  |   |      |  
|Amortization of prior service cost       |  |                            | (241  | ) |          |   | (241  | )    |  |   | (241  | ) |      |   |      |  |   |     |  |   |      |  
|Recognized net actuarial loss (gain)3    |  |                            | 903   |   |          |   | 151   |      |  |   | 118   |   |      |   | 205  |  |   | 317 |  |   | (210 | )
|Special termination benefits             |  |                            |       |   |          |   |       |      |  |   |       |   |      |   |      |  |   |     |  |   |      |  
|                                         |  |                            |       |   |          |   |       |      |  |   |       |   |      |   |      |  |   |     |  |   |      |  
|Net periodic benefit cost                |  | $                          | 6,383 |   |          | $ | 4,899 |      |  | $ | 4,567 |   |      | $ | 614  |  | $ | 753 |  | $ | 273  |  
|                                         |  |                            |       |   |          |   |       |      |  |   |       |   |      |   |      |  |   |     |  |   |      |  



Assumed health care
cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:



|                                                        |  |                            |       |             |          |        |             |  |             |     |  |   |      |  
|------------------------------------------------------- |  | -------------------------- | ----- | ----------- | -------- | ------ | ----------- |  | ----------- | --- |  | - | ---- | -
|                                                        |  | Other Benefits2            |      
|                                                        |  | Postretirement Health Care |       |             | Coal Act |       
|                                                        |  | 1% Increase                |       | 1% Decrease |          |        | 1% Increase |  | 1% Decrease |    
|Effect on total of service and interest cost components |  | $                          | 753   |             | $        | (599   | )           |  | $           | 44  |  | $ | (37  | )
|Effect on postretirement benefit obligation             |  |                            | 7,872 |             |          | (6,362 | )           |  |             | 789 |  |   | (658 | )



F-40



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



The Companys pension plan and postretirement health care plan weighted-average asset
allocations at December 31, 2004 and 2003, by asset category, were as follows:



|                                    |  |                   |   |  |                            |   |  |                 |   |  |      |  
|----------------------------------- |  | ----------------- | - |  | -------------------------- | - |  | --------------- | - |  | ---- | -
|                                    |  |                   |   |  |                            |   |  | Other Benefits2 |  
|                                    |  | Pension Benefits1 |   |  | Postretirement Health Care |  
|                                    |  | 2004              |   |  | 2003                       |   |  | 2004            |   |  | 2003 |  
|Weighted-average asset allocations: |  |                   |   |  |                            |   |  |                 |   |  |      |  
|Equity securities                   |  | 70.3              | % |  | 71.6                       | % |  |                 |   |  |      |  
|Debt securities                     |  | 29.3              | % |  | 28.3                       | % |  |                 |   |  |      |  
|Cash and cash equivalents           |  | .4                | % |  | 0.1                        | % |  | 100             | % |  | 100  | %
|                                    |  |                   |   |  |                            |   |  |                 |   |  |      |  
|                                    |  | 100               | % |  | 100                        | % |  | 100             | % |  | 100  | %
|                                    |  |                   |   |  |                            |   |  |                 |   |  |      |  



The return on plan
assets reflects the weighted-average expected long-term rate of return for the broad categories of investments held by the plans. The expected long-term rate of return is adjusted when there are fundamental changes in expected long-term returns on
plan investments.



The Companys investment strategy for
its pension plans is to preserve and increase principal and provide a sufficient expected long-term rate of return to meet the actuarial assumptions of the plans (i.e., expected long-term rate of 9% in 2004) within an acceptable level of risk. High
levels of risk are to be avoided at the total fund level through diversification by asset class, style of manager, and industry and sector limits. The investment policy establishes a target allocation for each asset class, which is re-balanced on a
quarterly basis. Target allocations for 2004 are 70% equity securities and 30% debt securities, which are consistent with the 2003 and 2002 target levels. Target tolerances are typically less than 5%. The plans utilize a number of equity, balanced
and fixed income funds, as well as investments in individual debt and equity securities, to achieve target asset allocations. The Companys investment strategy for its postretirement health care plan is to invest 100% of the principal in
low-risk, cash and cash equivalents to preserve the principal (i.e., expected long-term rate of 6% in 2004).



The Predecessor Company sold all 336,000 shares of the Predecessor Companys common stock in its Pension plan assets for $51,000 in May 2004. Pension
plan assets included 336,000 shares of the Predecessor Companys common stock at December 31, 2003. The ending market value for these shares was $1.416 million in 2003. There were no dividends paid during 2004 or 2003 on these shares.

---

|1 |  | Reflects the combined pension plans of the Company
|- |  | --------------------------------------------------

|2 |  | Reflects the postretirement health care and life insurance plan of the Company and benefits required under the 1992 Coal Act.
|- |  | -----------------------------------------------------------------------------------------------------------------------------

|3 |  | Includes the assumption change with regards to the Coal Act, which is recognized into net periodic benefit cost in the year of change.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



The accumulated benefit obligation for all defined benefit pension plans of
the Company was $92.125 million and $85.29 million at December 31, 2004 and 2003, respectively.



The aggregate projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit
obligations in excess of plan assets were $36.291 million, $31.919 million and $23.118 million, respectively, as of December 31, 2004 and $32.357 million, $28.32 million and $19.517 million, respectively, as of December 31, 2003.



F-41



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



The discount rate on the Reorganized Companys pension and other benefit plans was decreased to
6.00% at December 31, 2004 from 6.50% in 2003. Additionally, the annual rate of increase in the per capita cost of covered health care benefits was revised to 9% decreasing gradually to 5.00% at December 31, 2004 from 10.00% (pre-65) and 6.00%
(post-65), with the pre-65 rate decreasing gradually to 5.00% in 2009 and the post-65 rate decreasing gradually to 5.00% by 2006 at December 31, 2003. These changes resulted in an increase in the benefit obligation of $6.811 million for the pension
plans and $4.279 million related to the revision of the per capita cost of covered health care benefits) for the postretirement health care plan at December 31, 2004. The discount rate on the Companys pension and other benefit plans was
decreased to 6.50% at December 31, 2003 from 7.00% in 2002. These changes resulted in an increase in the benefit obligation of $3.994 million for the pension plans and $6.819 million ($1.199 million related to the revision of the per capita cost of
covered health care benefits) for the postretirement health care plan at December 31, 2003.



The Reorganized Company expects to contribute approximately $2.5 million to its pension plans and $3.1 million to its postretirement health care plan in 2005. Pension benefit payments are estimated to be $6.221
million, $6.318 million, $6.388 million, $7.314 million and $8.540 million for the years ended 2005, 2006, 2007, 2008 and 2009, respectively.



The Reorganized Companys postretirement health care plan provides prescription drug benefits that may be affected by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (the Act), signed into law in December 2003. In accordance with Federal Accounting Standards Board (FASB) Staff Position FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, the effects of the Act on the Reorganized Companys postretirement plan have not been included in the measurement of the Companys accumulated postretirement benefit
obligation or net periodic postretirement benefit cost for 2003. In February 2004, the FASB determined that the federal subsidy available under the Act to plan sponsors that provide retiree health benefits that are actuarially equivalent
to Medicare benefits should be accounted for within the scope of SFAS No. 106, Employers Accounting for Postretirement Benefits Other than Pensions. The effect of the federal subsidy on benefits attributable to past services and
future changes in the estimated amount of the subsidy should be accounted for as an actuarial gain under SFAS No. 106, while the effects of the subsidy attributable to future service should be accounted for as a reduction to future service costs.
Plan amendments made in contemplation of the subsidy should be accounted for as either an actuarial gain (if the net result of the amendment and the subsidy is a reduction to the accumulated post retirement benefit obligation) or a plan amendment
(if the net result of the amendment and subsidy increases the accumulated postretirement benefit obligation).



In May, 2004 the Federal Accounting Standards Board (FASB) Staff Position FAS 106-2, Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003, was issued which provided guidance on the accounting treatment for the federal subsidy. The Company determined that a portion of the prescription drug benefits provided
under some of its postretirement benefit plans will likely be deemed actuarially equivalent to the benefits provided under Medicare Part D. As a result of the provisions of the Medicare Prescription Drug, Improvement and Modernization Act of 2003,
the accumulated postretirement benefit obligation for the Company as of December 31, 2004 decreased by $7.325 million. The annual net periodic benefit cost for 2005 is expected to decrease by approximately $600,000.



The Reorganized Company maintains defined contribution plans for certain
employees including an employee stock ownership plan covering non-bargaining employees of the Reorganized Companys corporate office and certain other bargaining and non-bargaining employee groups and a 401K plan for certain bargaining
employees. During 2003, management of the Predecessor Company elected to indefinitely suspend and/or reduce



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



its contributions to the employee stock ownership plan. Contributions to the employee stock ownership plan by the Predecessor Company were equal to either 0%
or 25% of a participants contribution, depending on the participants employee group, up to a maximum of 8% of a participants compensation. In the Great Lakes Minerals segment, there was a match on one bargaining 401K plan of 5%.
The expense for these plans was $580,000, $1.185 million and $1.721 million for 2004, 2003 and 2002, respectively. The Predecessor Company also paid into certain defined benefit multi-employer plans under various union agreements that provide
pension and other benefits for various classes of employees. Payments are based upon negotiated contract rates and related expenses totaled $1.801 million, $1.394 million and $1.084 million for 2004, 2003 and 2002, respectively.



NOTE KCOMMITMENTS AND CONTINGENCIES



The Company leases various buildings, computers and equipment in addition to
a vessel charter in its Marine Services fleet. In general, these operating leases are renewable or contain purchase options. The purchase price or renewal lease payment is based on the fair market value of the asset at the date of purchase or
renewal. Rental expense was $9.922 million, $10.271 million and $9.918 million in 2004, 2003 and 2002, respectively.



Future minimum payments at December 31, 2004, under non-cancelable operating leases, are $6.987 million in 2005, $5.864 million in 2006, $4.104 million in
2007, $2.272 million in 2008, $2.005 million in 2009 and $10.526 million thereafter.



At December 31, 2004, the Reorganized Company employed approximately 1,650 people, of whom 329 are salaried employees. 48% of the Reorganized Companys employees are unionized, and the Reorganized Company is
party to eleven collective bargaining agreements with various labor unions. The Reorganized Company believes that it maintains good relations with each of these unions. In 2004, collective bargaining agreements representing approximately 567
employees expired. All collective bargaining agreements that were to expire during 2004 have been ratified without any work stoppages. In 2005, one collective bargaining agreement representing approximately 90 employees will expire. Management
expects to be able to negotiate a new contract with this labor union.



The Company and certain of its subsidiaries are involved in a limited number of claims and routine litigation incidental to operating the Companys current business. In each case, the Company is actively defending or prosecuting the
claims. Many of the claims are covered by insurance and none are expected to have a material adverse effect on the Companys financial condition.



Several of the Companys subsidiaries have been and continue to be named as defendants in a large number of cases relating to the exposure of people
to asbestos and silica. The plaintiffs in the cases generally seek compensatory and punitive damages of unspecified sums based upon the Jones Act, common law or statutory product liability claims. Some of these cases have been brought by plaintiffs
against the Company (or the Companys subsidiaries) and other marine services companies or product manufacturer co-defendants. Considering the Companys past and present operations relating to the use of asbestos and silica, it is possible
that additional claims may be made against the Company and the Companys subsidiaries based upon similar or different legal theories seeking similar or different types of damages and relief. Management is unable to estimate the Companys
potential exposure to unasserted claims. In the fourth quarter of 2004, the Company entered into a settlement agreement between one of its subsidiaries, ON Marine Services Company and certain tort plaintiffs to settle at least 750 of these claims
for $1.5 million utilizing certain insurance funds. Company funds will not be used to pay this settlement. The settlement was subject to the Bankruptcy Courts approval and confirmation of the Companys Plan. An order approving the
settlement and confirming the Plan was entered by the Bankruptcy Court on November 17, 2004.



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Management believes that both the asbestos and silica product liability claims are covered by
multiple layers of insurance policies from multiple sources and an insurance trust. In particular on December 31, 2004, prior to the settlement discussed above and below, the Company had approximately $294 million of insurance coverage available
with respect to any asbestos liability claims, broken down as follows: (1) about $63.2 million in cash in a trust on account of confidential settlement agreements between the Company and one of the Companys insurers, and (2) about $230.8
million on account of insurance policies. In addition, the Company had over $800 million of insurance coverage available with respect to any silica liabilities. After consultation with outside advisors, management believes that the insurers have no
legitimate defenses to coverage under these policies. Management further believes that the Company should be able to recover the full limits of the policies issued by solvent carriers.



At December 31, 2004, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims of about
73,000 claimants. In the fourth quarter of 2004, the Company entered into settlement agreements between the Companys affiliate ON Marine Services Company and certain tort plaintiffs, which were approved by the Bankruptcy Court. The settlements
with these tort plaintiffs resolve about 20,000 of the claims asserted against certain of the Companys affiliates as of December 31, 2004. Management estimates that the settlement payments under the settlement agreements for approximately
17,800 of these claims will aggregate about $53.204 million and will be paid from the insurance trust established pursuant to the Settlement Trust Agreement, made and entered into on August 28, 2003, by and among the Companys subsidiary ON
Marine Services Company, underwriters at Lloyds and London Market Company Signatories and Wells Fargo Bank Minnesota, N.A. The remaining 2,200 settled claims will be paid upon the approval of the insurers paying the claims, and the total
amount of settlement payments under the settlement agreements relating to these asbestos claims cannot be determined until medical and exposure evidence is provided by such claimants. Management anticipates that any settlement payments made on
account of such claims will be paid under both the insurance trust and other of the Companys insurance policies. At March 15, 2005, 11,180 filed and un-filed pending claims have been submitted and approved for payment in accordance with the
terms of the settlement agreements. The total settlement amount for these 11,180 claims is $34.367 million. Separate from the settlements, approximately 4,100 claims were dismissed in Mississippi for lack of in personam jurisdiction. The Company
received some new claims during bankruptcy even with the automatic stay on litigation, and has experienced an increase in filings since emergence. Due to the quantity of dismissals, settlements and new filings, an accurate pending claim count is not
possible at this time. Total pending claims will be adjusted and reported quarterly after account for the dismissals, settlements and new filings.



Management believes that the remaining currently outstanding claims can be satisfied or otherwise resolved within the limits of the Companys
remaining available insurance. Management cannot predict whether or not the Companys available insurance will be adequate to cover any and all asbestos claims that arise in the future or that the Company will have the ability to otherwise
successfully defend or resolve such cases. If there are no developments that reduce the impact of asbestos litigation or its costs, the Companys available insurance may be insufficient to cover all future claims, and there could be a material
adverse effect on the Companys results of operations, liquidity and financial condition. The severity of this risk cannot be measured, and is highly dependent on the rate of future claims, the cost to defend, settle, or otherwise resolve
claims, the length of time to resolve claims and the impact of future legislative or other developments in the asbestos litigation arena. The Companys ability to fund asbestos settlements or judgments will be subject to the availability of its
remaining insurance coverage and to funds from operations, asset sales or capital-raising transactions. Excluding the impact of the most recent settlements, the Company has about $294 million of insurance resources available to address both current
and future asbestos liabilities. The Company has had an average of 13,750 asbestos claims asserted against it each year for the past five years. The average cost per claim for settlement or other resolution for the



F-44



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



past five years prior to the most recent settlements was about $1,000; the average cost per claim of the most recent settlements was about $3,000.



The length of time to resolve claims varies on a case-by-case
basis and can be affected by decisions of management and opposing counsel. If there are no developments that reduce the impact of asbestos litigation or its costs to the Company, its available insurance may be insufficient to cover all future
claims, and there could be a material adverse effect on the Companys results of operations, liquidity and financial condition.



With respect to silica claims, at December 31, 2004, the Company was a co-defendant in cases involving about 23,000 claimants. The Company has been and
will continue to be responsible for funding a small percentage of all silica settlements and defense costs. The Company continues to have insurance coverage; however, certain policies have retroactive premiums that will come due if claims accrue to
those policies. The premiums are based upon actual and incurred losses and cannot be calculated until losses are incurred. The likelihood of liability for the Company arising out of these claims is probable.



The exposure of persons to silica and the accompanying health risks have been
and continue to be significant issues confronting the industrial minerals industry in general, and specifically the Companys Performance Minerals segment. Proposed changes to standards for exposure to silica are under review by the United
States Occupational Safety and Health Administration. This review could result in more stringent worker safety standards or, in the alternative, requirements for additional action on the part of silica users regarding lower permissible exposure
limits for silica. More stringent worker safety standards or additional action requirements, including the costs associated with these revised standards or additional action requirements, and actual or perceived concerns regarding the threat of
liability, or health risks, including silicosis, associated with silica use, may affect the buying decisions of the users of the Companys silica products. If worker safety standards are made more stringent, if the Company is required to take
additional action regarding lower permissible exposure limits for silica, or if the Companys customers decide to reduce their use of silica products based on actual or perceived health risks or liability concerns, the Companys operating
results, liquidity and capital resources could be materially adversely affected. The extent of any material adverse effect would depend on the nature and extent of the changes to the exposure standards, the cost of meeting and the Companys
ability to meet more stringent standards, the extent of any reduction in the Companys customers use of the Companys silica products and other factors that cannot be estimated at this time.



On February 20, 2004, the Company and Oglebay Norton Specialty Minerals,
Inc., a wholly-owned subsidiary, were named in an action filed by Pueblo of Picuris, in the District Court of Taos County, New Mexico, seeking to quiet title to certain land upon which a mica mine is situated in Taos County, New Mexico. The action
also includes a claim for money damages for allegations of trespass, denial of access, damage to property and other related claims. The Company is investigating the facts and circumstances surrounding this matter to determine if the Company has
liability or significant risk of adverse finding. The Company is in the process of selling these assets, and, as a result of the sale, anticipates settling this claim at no cost to the Company.



On November 11, 2004, the Company and Global Stone PenRoc, LP, one of the
Companys wholly-owned subsidiaries, received from National Gypsum Company, a customer of Global Stone, a demand letter seeking payment of approximately $1.2 million in connection with allegedly defective limestone sold by Global Stone to
National Gypsum in early 2004. Though the Companys investigation is in a very preliminary phase, management believes that the total loss, if any, is significantly lower than the amount demanded.



On or about December 23, 2004, certain current and former members of the
Companys Board of Directors were named as defendants in a complaint filed by a former shareholder. Although the Company was not named in the complaint, it has agreed to indemnify the Directors pursuant to Ohio law, the Companys First
Amended and Restated Articles of Incorporation, and certain indemnification agreements the Company entered into with



F-45



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



the named Directors. The Company maintains director and officer liability insurance, which has a deductible of $750,000. Although the outcome of the suit is
not determinable at this time, management does not anticipate expending funds in excess of the deductible for indemnity or defense.



On January 31, 2005, the Senior Secured Notes were redeemed at 106% of par value immediately after their reinstatement pursuant to the Plan in accordance
with the terms of the Senior Secured Notes purchase agreement; however, certain Senior Secured Notes holders have filed a lawsuit claiming entitlement to default interest and penalties from the former Senior Subordinated Notes holders, based upon an
argument that the Senior Subordinated Notes holders claims in bankruptcy were subordinate to the claims of the Senior Secured Notes holders. The Bankruptcy Court ruled in favor of the Company and the Senior Subordinated Notes holders and
certain Senior Secured Notes holders have appealed. If the Senior Secured Notes holders succeed in their appeal, it is possible that the positions of the common shareholders could be diluted.



During the fourth quarter of 2003, the Company settled a series of
multi-party lawsuits and an arbitration relating to its prior involvement in Eveleth Mines. The parties included the current mine operator and its shareholders, an insurance carrier and one of the Companys subsidiaries. The nature of the
allegations against the Company included claims relating to the liability for retrospective premiums and duty to reimburse others for legal expenses incurred in defending settled litigation. Under the settlement, the Company has agreed to pay $3.65
million to the insurance carrier, with an initial payment of $1.0 million made in December 2003 and the remainder payable in monthly installments through March 2006. These payments were suspended while the Company was in bankruptcy. Accordingly, the
Company has recorded a liability of $2.404 million at December 31, 2004, representing the present value of the required future payments.The Company maintains recourse against the current operator, Eveleth Mines LLC (d.b.a. EVTAC Mining), for
its share of the total settlement with the insurance carrier. However, since EVTAC Mining filed for protection under Chapter 11 of the U.S. Bankruptcy Code in May 2003, the Company has fully reserved for the $2.239 million due from EVTAC Mining.



Litigation is inherently unpredictable and subject to many
uncertainties. Adverse court rulings, determinations of liability or retroactive or prospective changes in the law could affect claims made against the Company and encourage or increase the number and nature of future claims and proceedings.
Together with reserves recorded and available insurance, pending litigation is not expected to have a material adverse effect on the Companys operations, liquidity or financial condition.



NOTE LINDUSTRY SEGMENTS AND MAJOR CUSTOMERS



The Company is headquartered in Cleveland, Ohio and supplies essential
natural resources to industrial and commercial customers. The Company operates its businesses as three reporting segments focused on its key markets served. The segments align operations, which share business strategies, are related by geography and
product mix, and reflect the way management evaluates the operating performance of its businesses. The operations are reported as: Great Lakes Minerals, Global Stone, and Performance Minerals. Through the direct sales force of each operating
segment, the Company serves customers in a wide range of industries, including building products, energy, environmental and industrial. The composition of the segments and measure of segment profitability is consistent with that used by the
Companys management. The Companys primary measurement focus is operating income and EBITDA. Interest expense, other income (expense) and restructuring charges are grouped with Corporate and Other and not presented by segment, since they
are excluded from the measure of segment profitability used by the Companys management. The accounting policies of the segments are the same as those described in Note B.



F-46



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



Great Lakes Minerals



The Great Lakes Minerals business segment is the largest and only fully integrated producer and bulk transporter of limestone on the Great Lakes and
combines the Companys Michigan Limestone, Marine Services and Erie Sand and Gravel operations. Great Lakes Minerals operations primarily serve the industrial and chemical, building materials and construction and energy industries. This
business segment operates four Michigan limestone quarries, dock facilities and a fleet of 12 self-unloading vessels on the Great Lakes. The segments operations primarily supply limestone aggregate and chemical limestone, limestone for
construction and other purposes, iron ore for integrated steel manufacturers and coal for electric utility companies.



Global Stone



The Global Stone business segment primarily mines and processes lime, limestone fillers, chemical limestone and construction aggregate. Overall, this
business segment has seven operations and operates twelve limestone quarries, primarily in the Southeast and Mid-Atlantic regions of the United States. Lime and chemical limestone are used for water and waste treatment, steel making, flue gas
desulfurization, glass production, animal



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



feed, fertilizers, and fillers for plastic, latex, and sealants. Limestone fillers are used for many diverse industrial and agricultural processes, including
fiberglass, roofing shingles, carpet backing and animal feed. Limestone is sized and graded for aggregates primarily used in construction.



Performance Minerals



The Performance Minerals business segment mines and processes specialized industrial minerals, primarily high-purity silica sands and muscovite mica, and
combines the Industrial Sands and Specialty Minerals operations. This business segment includes six operations in the southwestern United States, one operation in Ohio and one in North Carolina. It produces fracturing sands used in oil and gas well
drilling; industrial sands used as abrasives and for fillers in building materials; silica flour for fiberglass and ceramic production; recreational sands for golf courses, playgrounds, athletic fields, and landscaping; foundry sands for ferrous and
non-ferrous metal die casting; filtration sands; and wet-ground, dry-ground and surface-modified mica, which are value-added ingredients in joint compounds, paint and rubber and plastic compounds. In the third quarter of 2004, operations were
temporarily suspended at the Performance Minerals segments Specialty Minerals operations Velarde plant. See Note N Subsequent Events for a discussion of the Board of Directors decision to authorize the sale of the mica
operations.



Geographic information for revenues and long-lived
assets are as follows (in thousands):



|                         |  |           |         |                  |   |        
|------------------------ |  | --------- | ------- | ---------------- | - | -------
|                         |  | Revenues1 |         | Long-LivedAssets
|2004                     |  |           |         |                  |   |        
|United States            |  | $         | 422,996 |                  | $ | 450,228
|Canada and other foreign |  |           | 12,654  |                  |   |        
|                         |  |           |         |                  |   |        
|Consolidated             |  | $         | 435,650 |                  | $ | 450,228
|                         |  |           |         |                  |   |        
|2003                     |  |           |         |                  |   |        
|United States            |  | $         | 384,156 |                  | $ | 455,272
|Canada and other foreign |  |           | 20,073  |                  |   |        
|                         |  |           |         |                  |   |        
|Consolidated             |  | $         | 404,229 |                  | $ | 455,272
|                         |  |           |         |                  |   |        
|2002                     |  |           |         |                  |   |        
|United States            |  | $         | 385,626 |                  | $ | 482,701
|Canada and other foreign |  |           | 14,946  |                  |   |        
|                         |  |           |         |                  |   |        
|Consolidated             |  | $         | 400,572 |                  | $ | 482,701
|                         |  |           |         |                  |   |        

---

|1 |  | Revenues are attributed to countries based on the location of customers.
|- |  | ------------------------------------------------------------------------



Accounts receivable of $15.154 million, $12.215 million, $10.204 million, $8.848 million and $6.503 million are due from
companies in the construction, metallurgy, building materials, energy and environmental industries, respectively, at December 31, 2004. Credit is extended based on an evaluation of a customers financial condition and, generally, collateral is
not required. Credit losses within these industries have not been historically significant. There were no customers that exceeded 10% of consolidated net sales and operating revenues in 2004, 2003 or 2002.



F-48



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OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|--------------------------------------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ------------- | - | ------- | -------------------- |  | - | -------------- | - |  | ------------------- | ------- | - | ------------ | - | -------- | -- |  | - | -------- | -
|In Thousands                                                                                                    |  | Great Lakes Minerals1 |         |   | Global Stone2 |   |         | Performance Minerals |  |   | Total Segments |   |  | Corporate and Other |         |   | Consolidated |  
|2004                                                                                                            |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Identifiable assets                                                                                             |  | $                     | 227,853 |   |               | $ | 205,600 |                      |  | $ | 122,713        |   |  | $                   | 556,166 |   |              | $ | 123,6185 |    |  | $ | 679,784  |  
|Depreciation, depletion and amortization expense                                                                |  |                       | 15,149  |   |               |   | 13,659  |                      |  |   | 7,142          |   |  |                     | 35,950  |   |              |   | 296      |    |  |   | 36,246   |  
|Capital expenditures                                                                                            |  |                       | 9,768   |   |               |   | 9,580   |                      |  |   | 4,387          |   |  |                     | 23,735  |   |              |   | 164      |    |  |   | 23,899   |  
|Net sales and operating revenues                                                                                |  | $                     | 171,201 |   |               | $ | 165,425 |                      |  | $ | 99,024         |   |  | $                   | 435,650 |   |              |   |          |    |  | $ | 435,650  |  
|Intersegment revenues, at market                                                                                |  |                       | 3,782   |   |               |   |         |                      |  |   |                |   |  |                     | 3,782   |   |              | $ | (3,782   | )  |  |   |          |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Total net sales and operating revenues                                                                          |  | $                     | 174,983 |   |               | $ | 165,425 |                      |  | $ | 99,024         |   |  | $                   | 439,432 |   |              | $ | (3,782   | )  |  | $ | 435,650  |  
|Operating income (loss), before the provision for restructuring, asset impairment and early retirement programs |  | $                     | 14,312  |   |               | $ | 14,608  |                      |  | $ | 15,359         |   |  | $                   | 44,279  |   |              | $ | (17,084  | )  |  | $ | 27,195   |  
|Provision for restructuring, asset impairments and early retirement programs                                    |  |                       | 1,315   |   |               |   |         |                      |  |   | 5,695          |   |  |                     | 7,010   |   |              |   | 436      |    |  |   | 7,446    |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Operating income (loss)                                                                                         |  | $                     | 12,997  |   |               | $ | 14,608  |                      |  | $ | 9,664          |   |  | $                   | 37,269  |   |              | $ | (17,520  | )4 |  | $ | 19,749   |  
|Reorganization items, net                                                                                       |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   | (78,192  | )  |  |   | (78,192  | )
|(Loss) gain on disposition of assets                                                                            |  |                       | (25     | ) |               |   | 32      |                      |  |   |                |   |  |                     | 7       |   |              |   |          |    |  |   | 7        |  
|Interest expense                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   | (54,588  | )  |  |   | (54,588  | )
|Other incomenet                                                                                                |  |                       |         |   |               |   | 132     |                      |  |   |                |   |  |                     | 132     |   |              |   | 5,809    |    |  |   | 5,941    |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Income (loss) before income taxes and cumulative effect of accounting change                                    |  | $                     | 12,972  |   |               | $ | 14,772  |                      |  | $ | 9,664          |   |  | $                   | 37,408  |   |              | $ | (144,491 | )  |  | $ | (107,083 | )
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|2003                                                                                                            |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Identifiable assets                                                                                             |  | $                     | 265,737 |   |               | $ | 250,080 |                      |  | $ | 75,549         |   |  | $                   | 591,366 |   |              | $ | 58,4653  |    |  | $ | 649,831  |  
|Depreciation, depletion and amortization expense                                                                |  |                       | 15,117  |   |               |   | 14,360  |                      |  |   | 7,993          |   |  |                     | 37,470  |   |              |   | 307      |    |  |   | 37,777   |  
|Capital expenditures                                                                                            |  |                       | 7,956   |   |               |   | 7,467   |                      |  |   | 3,105          |   |  |                     | 18,528  |   |              |   | 637      |    |  |   | 19,165   |  
|Net sales and operating revenues                                                                                |  | $                     | 143,295 |   |               | $ | 173,272 |                      |  | $ | 87,662         |   |  | $                   | 404,229 |   |              |   |          |    |  | $ | 404,229  |  
|Intersegment revenues, at market                                                                                |  |                       | 3,996   |   |               |   |         |                      |  |   |                |   |  |                     | 3,996   |   |              | $ | (3,996   | )  |  |   |          |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Total net sales and operating revenues                                                                          |  | $                     | 147,291 |   |               | $ | 173,272 |                      |  | $ | 87,662         |   |  | $                   | 408,225 |   |              | $ | (3,996   | )  |  | $ | 404,229  |  
|Operating income (loss), before the provision for restructuring, asset impairment and early retirement programs |  | $                     | 4,990   |   |               | $ | 12,583  |                      |  | $ | 10,211         |   |  | $                   | 27,784  |   |              | $ | (21,210  | )  |  | $ | 6,574    |  
|Provision for restructuring, asset impairments and early retirement programs                                    |  |                       |         |   |               |   | 159     |                      |  |   | 13,114         |   |  |                     | 13,273  |   |              |   | (52      | )  |  |   | 13,221   |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Operating income (loss)                                                                                         |  | $                     | 4,990   |   |               | $ | 12,424  |                      |  | $ | (2,903         | ) |  | $                   | 14,511  |   |              | $ | (21,158  | )4 |  | $ | (6,647   | )
|(Loss) gain on disposition of assets                                                                            |  |                       | (7      | ) |               |   | (3,702  | )                    |  |   | (40            | ) |  |                     | (3,749  | ) |              |   | 63       |    |  |   | (3,686   | )
|Interest expense                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   | (53,843  | )  |  |   | (53,843  | )
|Other incomenet                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   | 2,032    |    |  |   | 2,032    |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Income (loss) before income taxes and cumulative effect of accounting change                                    |  | $                     | 4,983   |   |               | $ | 8,722   |                      |  | $ | (2,943         | ) |  | $                   | 10,762  |   |              | $ | (72,906  | )  |  | $ | (62,144  | )
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|2002                                                                                                            |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Identifiable assets                                                                                             |  | $                     | 266,064 |   |               | $ | 270,905 |                      |  | $ | 89,512         |   |  | $                   | 626,481 |   |              | $ | 62,8303  |    |  | $ | 689,311  |  
|Depreciation, depletion and amortization expense                                                                |  |                       | 14,367  |   |               |   | 12,481  |                      |  |   | 6,717          |   |  |                     | 33,565  |   |              |   | 100      |    |  |   | 33,665   |  
|Capital expenditures                                                                                            |  |                       | 5,963   |   |               |   | 9,395   |                      |  |   | 3,913          |   |  |                     | 19,271  |   |              |   | 745      |    |  |   | 20,016   |  
|Net sales and operating revenues                                                                                |  | $                     | 153,432 |   |               | $ | 161,220 |                      |  | $ | 85,920         |   |  | $                   | 400,572 |   |              |   |          |    |  | $ | 400,572  |  
|Intersegment revenues, at market                                                                                |  |                       | 3,488   |   |               |   |         |                      |  |   |                |   |  |                     | 3,488   |   |              | $ | (3,488   | )  |  |   |          |  
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Total net sales and operating revenues                                                                          |  | $                     | 156,920 |   |               | $ | 161,220 |                      |  | $ | 85,920         |   |  | $                   | 404,060 |   |              | $ | (3,488   | )  |  | $ | 400,572  |  
|Operating income (loss), before the provision for restructuring, asset impairment and early retirement programs |  | $                     | 18,858  |   |               | $ | 15,603  |                      |  | $ | 12,316         |   |  | $                   | 46,777  |   |              | $ | (12,189  | )  |  | $ | 34,588   |  
|Provision for restructuring, asset impairments and early retirement programs                                    |  |                       |         |   |               |   | 319     |                      |  |   | 835            |   |  |                     | 1,154   |   |              |   | (1,191   | )  |  |   | (37      | )
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Operating income (loss)                                                                                         |  | $                     | 18,858  |   |               | $ | 15,284  |                      |  | $ | 11,481         |   |  | $                   | 45,623  |   |              | $ | (10,998  | )4 |  | $ | 34,625   |  
|(Loss) gain on disposition of assets                                                                            |  |                       | (28     | ) |               |   | 134     |                      |  |   | (51            | ) |  |                     | 55      |   |              |   |          |    |  |   | 55       |  
|Interest expense                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   | (43,595  | )  |  |   | (43,595  | )
|Other expensenet                                                                                               |  |                       |         |   |               |   |         |                      |  |   | (179           | ) |  |                     | (179    | ) |              |   | (3,942   | )  |  |   | (4,121   | )
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  
|Income (loss) before income taxes and cumulative effect of accounting charge                                    |  | $                     | 18,830  |   |               | $ | 15,418  |                      |  | $ | 11,251         |   |  | $                   | 45,499  |   |              | $ | (58,535  | )  |  | $ | (13,036  | )
|                                                                                                                |  |                       |         |   |               |   |         |                      |  |   |                |   |  |                     |         |   |              |   |          |    |  |   |          |  

---

|1 |  | Includes the results of operations of Erie Sand and Gravel from the acquisition date of January 2003.
|- |  | -----------------------------------------------------------------------------------------------------

|2 |  | Includes the results of operations of the Lawn and Garden business unit through October 2003 when it was sold.
|- |  | --------------------------------------------------------------------------------------------------------------

|3 |  | Consists primarily of prepaid pension assets and deferred financing fees in each of the years.
|- |  | ----------------------------------------------------------------------------------------------

|4 |  | Includes Corporate general, administrative and selling expenses as well as restructuring charges.
|- |  | -------------------------------------------------------------------------------------------------

|5 |  | Consists primarily of receivable for issuable preferred stock.
|- |  | --------------------------------------------------------------



F-49



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



NOTE MQUARTERLY RESULTS OF OPERATIONS (UNAUDITED)



Unaudited quarterly results of operations for the years ended December 31,
2004 and 2003 are summarized as follows (In thousands):



|                                                   |  |               |         |   |          |   |         |         |  |   |         |   |  |   |         |  
|-------------------------------------------------- |  | ------------- | ------- | - | -------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                                   |  | Quarter Ended |        
|                                                   |  | Dec. 31       |         |   | Sept. 30 |   |         | June 30 |  |   | Mar. 31 |  
|2004                                               |  |               |         |   |          |   |         |         |  |   |         |   |  |   |         |  
|Net sales and operating revenues                   |  | $             | 113,247 |   |          | $ | 130,397 |         |  | $ | 122,572 |   |  | $ | 69,434  |  
|Cost of goods sold and operating expenses          |  |               | 91,435  |   |          |   | 96,929  |         |  |   | 91,327  |   |  |   | 54,534  |  
|Gross Profit                                       |  |               | 13,135  |   |          |   | 22,725  |         |  |   | 20,881  |   |  |   | 9,825   |  
|Net loss                                           |  |               | (73,970 | ) |          |   | (12,955 | )       |  |   | (1,413  | ) |  |   | (17,737 | )
|Per common share:                                  |  |               |         |   |          |   |         |         |  |   |         |   |  |   |         |  
|Net lossbasic and assuming dilution               |  |               | (14.14  | ) |          |   | (2.47   | )       |  |   | (0.26   | ) |  |   | (3.40   | )
|2003                                               |  |               |         |   |          |   |         |         |  |   |         |   |  |   |         |  
|Net sales and operating revenues                   |  | $             | 103,312 |   |          | $ | 121,527 |         |  | $ | 116,506 |   |  | $ | 62,884  |  
|Cost of goods sold and operating expenses          |  |               | 85,786  |   |          |   | 91,030  |         |  |   | 88,884  |   |  |   | 49,544  |  
|Gross Profit                                       |  |               | 8,597   |   |          |   | 19,607  |         |  |   | 17,015  |   |  |   | 8,264   |  
|Loss before cumulative effect of accounting change |  |               | (9,886  | ) |          |   | 325     |         |  |   | (12,581 | ) |  |   | (9,659  | )
|Net (loss) income                                  |  |               | (9,886  | ) |          |   | 325     |         |  |   | (12,581 | ) |  |   | (11,050 | )
|Per common share:                                  |  |               |         |   |          |   |         |         |  |   |         |   |  |   |         |  
|Loss before cumulative effect of accounting change |  |               | (1.90   | ) |          |   | 0.06    |         |  |   | (2.47   | ) |  |   | (1.90   | )
|Net (loss) incomebasic and assuming dilution      |  |               | (1.90   | ) |          |   | 0.06    |         |  |   | (2.47   | ) |  |   | (2.17   | )



During the fourth
quarter of 2004, the Company recorded a $59.413 million charge to reorganization items, net, as part of Fresh-Start reporting adjustments made to reflect the fair value of assets and liabilities, on a net basis, the restructuring of the
Companys capital structure and the resulting discharge of the senior lenders pre-petition debt. See Note B Fresh-Start Reporting and Accounting Policies for further discussion of this adjustment.



During the third quarter of 2004, the Company recorded a $5.695 million
pre-tax asset impairment charge to further reduce the net book value of the Performance Minerals segments Specialty Minerals operations Velarde plant. The impairment indicator was a temporary suspension of operations of the Velarde plant. The
Velarde plant was written down to the estimated fair value based on current market offers.



In addition, $3.640 million of financing fees related to the pre-petition syndicated facility and initial DIP credit facility were written off in the third quarter of 2004 upon securing the second DIP credit
facility.



During the second quarter of 2004, the Company
completed a settlement with an insolvent insurance group for $4.668 million in respect of past and future claims. The $4.668 million was recorded as other income in the second quarter of 2004, and the restricted cash is recorded as an other current
asset on the consolidated balance sheet as of December 31, 2004.



In the first quarter of 2004, the Company recorded a $1.315 million pre-tax asset impairment charge related to the exit and sublease of the Cleveland Marine Services office. Of this charge, $1.17 million was primarily related to the
difference between base rent due until December 2009 and sublease income that will be received into March 2008. An additional $145,000 pre-tax charge was recorded to write-off leasehold improvements abandoned at the Marine office.



F-50



---

OGLEBAY NORTON COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2004, 2003 and 2002



During the fourth quarter of 2003, the Company sold the Lawn and Garden business unit of its Global
Stone segment for a pre-tax loss of $3.692 million. The loss was included in gain (loss) on disposition of assets on the consolidated statement of operations. See Note C for additional disclosures related to the sale of the Lawn and Garden business
unit.



Net income for the third quarter of 2003 included a
pre-tax charge of $1.349 million to increase the Companys provision for doubtful accounts, primarily to reflect the increased risk of doubtful collection regarding two customers of the Great Lakes Minerals segment who filed for Chapter 11
bankruptcy protection. The charge was included in provision for doubtful accounts on the consolidated statement of operations.



Net loss for the second quarter of 2003 included an impairment charge of $13.114 million pre-tax (or $1.57 per share, assuming dilution) to reduce the net
book value of the Performance Minerals segments Specialty Minerals operation to its estimated fair value, as determined by management based on a third-party appraisal. The impairment charge was included in provision for restructuring, asset
retirements and early retirement programs on the consolidated statement of operations. See Note D for additional disclosures related to the impairment charge.



Net loss for the first quarter of 2003 included a pre-tax charge of $1.455 million to partially reserve for EVTAC Mining. EVTAC Mining is a non-trade
debtor to the Company for obligations arising out of a prior relationship who filed for protection under Chapter 11 of the U.S. Bankruptcy Code in May 2003. Due to changes in facts and circumstances, an additional pre-tax charge of $784,000 was
included in net loss for the third quarter of 2003 to fully reserve for this matter. These charges were included in other income (expense) on the consolidated statement of operations. See Note K for additional disclosures regarding EVTAC Mining.



Net loss for the first quarter of 2003 included a pre-tax
charge of $2.280 million for the cumulative effect of an accounting change for asset retirement obligations. See Note B for additional disclosures on asset retirement obligations.



NOTE NSUBSEQUENT EVENTS



On January 31, 2005, the Reorganized Company and all of its subsidiaries legally emerged from protection under Chapter 11 of the United States Bankruptcy
Code.



As previously disclosed, management had been in
discussions to sell the Companys mica operations (Kings Mountain and Velarde operations). Due to the bankruptcy proceedings, the Company was not authorized to sell any assets. Upon emergence from bankruptcy and the installation of a new Board
of Directors, plans to sell the mica operations have resumed. On March 10, 2005, subsequent to the December 31, 2004 fiscal year-end but before the issuance of the 2004 year-end financial statements, the Board of Directors provided authorization for
the sale of the mica operations. At that time, the Company determined that the plan of sale criteria in FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, had been met. Due to the timing of
when the Company satisfied the criteria for the mica operations to be considered held for sale, the mica operations are considered as held and used in the December 31, 2004 financial statements. The carrying amount of the
mica operations is approximately $15 million. The Company believes that the Kings Mountain operation will be sold prior to the end of the second quarter of fiscal year 2005. The Company believes that the Velarde operation will be sold prior to the
end of fiscal year 2005.



F-51



---

|                |  |                                                                                                                                       |  |                                                                                                                                                          
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|SEC Exhibit No. |  | Description                                                                                                                           |  | Location                                                                                                                                                 
|3(a)            |  | Second Amended and Restated Articles of Incorporation of Oglebay Norton Company                                                       |  | Incorporated herein by reference to Exhibit 3.1 to Registrants Registration Statement on Form8-A12G (Commission No. 000-32665) filed on January 31, 2005
|3(b)            |  | Amended and Restated Regulations of Oglebay Norton Company                                                                            |  | Incorporated herein by reference to Exhibit 3.2 to Registrants Registration Statement on Form8-A12G (Commission No. 000-32665) filed on January 31, 2005
|4(a)            |  | Specimen certificate for shares of common stock of Oglebay Norton Company                                                             |  | Filed herewith as Exhibit 4(a)                                                                                                                           
|4(b)            |  | Specimen certificate for shares of Series A Convertible Preferred Stock of Oglebay Norton Company                                     |  | Filed herewith as Exhibit 4(b)                                                                                                                           
|4(c)            |  | Registration Rights Agreement, dated as of January 31, 2005, among Oglebay Norton Company and the parties who are signatories thereto |  | Incorporated herein by reference to Exhibit 4.2 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005          
|10(a)           |  | 2005 Management Stock Plan of Oglebay Norton Company*                                                                                 |  | Incorporated herein by reference to Exhibit 4.1 to Registrants Registration Statement on Form S-8 (Commission No. 333-122432) filed on January 31, 2005 
|10(a)(1)        |  | Form of Restricted Stock Agreement*                                                                                                   |  | Incorporated herein by reference to Exhibit 10.29 to Registrants Registration Statement on FormS-1 (Commission No. 333-122349) filed on January 27, 2005
|10(a)(2)        |  | Form of Stock Option Agreement*                                                                                                       |  | Incorporated herein by reference to Exhibit 10.28 to Registrants Registration Statement on FormS-1 (Commission No. 333-122349) filed on January 27, 2005
|10(b)           |  | Oglebay Norton Company Management Incentive Plan*                                                                                     |  | Incorporated herein by reference to Exhibit 10.18 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005        
|10(c)(1)        |  | Change in Control and Employment Agreement, dated January 31, 2005, between Oglebay Norton Company and Michael D. Lundin*             |  | Incorporated herein by reference to Exhibit 10.10 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005        
|10(c)(2)        |  | Change in Control and Employment Agreement, dated January 31, 2005, between Oglebay Norton Company and Julie A. Boland*               |  | Incorporated herein by reference to Exhibit 10.11 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005        



I-1



---

|                |  |                                                                                                                                                                                                                                             |  |                                                                                                                                                                               
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|SEC Exhibit No. |  | Description                                                                                                                                                                                                                                 |  | Location                                                                                                                                                                      
|10(c)(3)        |  | Change in Control and Employment Agreement, dated January 31, 2005, between Oglebay Norton Company and Sylvie A. Bon*                                                                                                                       |  | Incorporated herein by reference to Exhibit 10.12 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005                             
|10(c)(4)        |  | Change in Control and Employment Agreement, dated January 31, 2005, between Oglebay Norton Company and Michael J. Minkel*                                                                                                                   |  | Incorporated herein by reference to Exhibit 10.13 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005                             
|10(c)(5)        |  | Change in Control and Employment Agreement, dated January 31, 2005, between Oglebay Norton Company and Rochelle F. Walk*                                                                                                                    |  | Incorporated herein by reference to Exhibit 10.14 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005                             
|10(d)           |  | Director Compensation Summary Sheet*                                                                                                                                                                                                        |  | Incorporated herein by reference to Exhibit 10.19 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005                             
|10(e)           |  | Interest Purchase Agreement, dated as of April 14, 2000, by and among Oglebay Norton Company, Johnson Mining Inc., The Cary Mining Company, Inc., Michigan Minerals Associates, Inc. and Michigan
Limestone Operations Limited Partnership* |  | Incorporated herein by reference to Exhibit 10.64 to Amendment No. 1 to Registrants Registration Statement on Form S-1 (Commission No. 333-115513) filed on November 19,
2004
|10(e)(1)        |  | Amendment No. 1 to Interest Purchase Agreement, by and among Oglebay Norton Company, Johnson Mining Inc., The Cary Mining Company, Inc., Michigan Minerals Associates, Inc. and Michigan Limestone
Operations Limited Partnership*          |  | Incorporated herein by reference to Exhibit 10.8 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005                              
|10(e)(2)        |  | Form of MLO Guaranty*                                                                                                                                                                                                                       |  | Incorporated herein by reference to Exhibit 10.9 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005                              
|10(f)(1)        |  | Director Indemnification Agreement with DeLyle W. Bloomquist, dated February 10, 2005                                                                                                                                                       |  | Incorporated herein by reference to 10.1 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005                                     
|10(f)(2)        |  | Director Indemnification Agreement with Thomas O. Boucher, Jr., dated February 10, 2005                                                                                                                                                     |  | Incorporated herein by reference to 10.2 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005                                     
|10(f)(3)        |  | Director Indemnification Agreement with Eugene I. Davis, dated February 10, 2005                                                                                                                                                            |  | Incorporated herein by reference to 10.3 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005                                     



I-2



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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                     
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|SEC Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Location                                                                                                                                            
|10(f)(4)        |  | Director Indemnification Agreement with Laurence V. Goddard, dated February 10, 2005                                                                                                                                                                                                                                                                                                                                                                                          |  | Incorporated herein by reference to 10.4 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005           
|10(f)(5)        |  | Director Indemnification Agreement with Robert H. Kanner, dated February 10, 2005                                                                                                                                                                                                                                                                                                                                                                                             |  | Incorporated herein by reference to 10.5 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005           
|10(f)(6)        |  | Director Indemnification Agreement with John P. OBrien, dated February 10, 2005                                                                                                                                                                                                                                                                                                                                                                                              |  | Incorporated herein by reference to 10.6 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005           
|10(f)(7)        |  | Director and Officer Indemnification Agreement with Michael D. Lundin, dated February 10, 2005*                                                                                                                                                                                                                                                                                                                                                                               |  | Incorporated herein by reference to 10.7 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005           
|10(f)(8)        |  | Officer Indemnification Agreement with Julie A. Boland, dated February 10, 2005*                                                                                                                                                                                                                                                                                                                                                                                              |  | Incorporated herein by reference to 10.8 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005           
|10(f)(9)        |  | Officer Indemnification Agreement with Sylvie A. Bon, dated February 10, 2005*                                                                                                                                                                                                                                                                                                                                                                                                |  | Incorporated herein by reference to 10.9 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005           
|10(f)(10)       |  | Officer Indemnification Agreement with Michael J. Minkel, dated February 10, 2005*                                                                                                                                                                                                                                                                                                                                                                                            |  | Incorporated herein by reference to 10.10 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005          
|10(f)(11)       |  | Officer Indemnification Agreement with Rochelle F. Walk, dated February 10, 2005*                                                                                                                                                                                                                                                                                                                                                                                             |  | Incorporated herein by reference to 10.11 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 11, 2005          
|10(g)           |  | Financing Agreement, dated as of January 31, 2005, among Oglebay Norton Company and certain subsidiaries of Oglebay Norton Company, as borrowers, all other subsidiaries of Oglebay Norton
Company, as guarantors, the lenders from time to time party thereto, Wells Fargo Foothill, Inc., as administrative agent, Bank One, NA and Bank of America, N.A., as documentation agents, and Silver Point Finance, LLC, as collateral agent,
syndication agent and lead arranger |  | Incorporated herein by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005



I-3



---

|                |  |                                                                                                                                                                                                                    |  |                                                                                                                                                   
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|SEC Exhibit No. |  | Description                                                                                                                                                                                                        |  | Location                                                                                                                                          
|10(g)(1)        |  | Security Agreement, dated as of January 31, 2005, executed by the Reorganized Companies in favor of Silver Point Finance, LLC, a Delaware limited liability company, as collateral
agent                           |  | Incorporated herein by reference to Exhibit 10.3 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005  
|10(g)(2)        |  | Pledge Agreement, dated as of January 31, 2005, executed by the Reorganized Companies in favor of Silver Point Finance, LLC, a Delaware limited liability company, as collateral
agent                             |  | Incorporated herein by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005  
|10(h)           |  | Oglebay Norton Company Excess and TRA Supplemental Benefit Retirement Plan (January 1, 1991 Restatement)*                                                                                                          |  | Incorporated herein by reference to Exhibit 10(o) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 31, 1997   
|10(h)(1)        |  | First Amendment to Oglebay Norton Company Excess and TRA Supplemental Benefit Retirement Plan (January 1, 1991 Restatement)*                                                                                       |  | Incorporated herein by reference to Exhibit 10(o)(1) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 31, 1997
|10(h)(2)        |  | Second Amendment to Oglebay Norton Company Excess and TRA Supplemental Benefit Retirement Plan (January 1, 1991 Restatement), dated as of December 17, 1997*                                                       |  | Incorporated herein by reference to Exhibit 10(m)(2) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 25, 1998
|10(i)           |  | Oglebay Norton Company Assurance Trust Agreement, dated as of April 17, 2002, by and between Oglebay Norton Company and Bank One, Trust Company (which replaces the Oglebay Norton Company
Pour-Over Rabbi Trust)* |  | Filed herewith as Exhibit 10(i)                                                                                                                   
|10(j)           |  | Irrevocable Trust Agreement II*                                                                                                                                                                                    |  | Incorporated herein by reference to Exhibit 10(l) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 31, 1997   
|10(k)           |  | Credit Agreement, dated as of July 14, 1997, by and among ON Marine Services Company and National City Bank                                                                                                        |  | Incorporated herein by reference to Exhibit 10.4 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005  
|10(k)(1)        |  | First Amendment to Credit Agreement, dated as of the 15th day of January 1999, by and between ON Marine Services Company and National City Bank                                                                    |  | Filed herewith as Exhibit 10(k)(1)                                                                                                                
|10(k)(2)        |  | Second Amendment to Credit Agreement, dated as of the 15th day of July 1999, by and between ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                        |  | Filed herewith as Exhibit 10(k)(2)                                                                                                                



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|                |  |                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                 
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|SEC Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                       |  | Location                                                                                                                                        
|10(k)(3)        |  | Third Amendment to Credit Agreement, dated as of the 12th day of July 2000, by and between ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                        |  | Filed herewith as Exhibit 10(k)(3)                                                                                                              
|10(k)(4)        |  | Fourth Amendment to Credit Agreement, dated as of the 30th day of September 2001, by and among ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                    |  | Filed herewith as Exhibit 10(k)(4)                                                                                                              
|10(k)(5)        |  | Fifth Amendment to Credit Agreement, dated as of the 24th day of December 2001, by and among ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                      |  | Filed herewith as Exhibit 10(k)(5)                                                                                                              
|10(k)(6)        |  | Sixth Amendment to Credit Agreement, dated as of the 25th day of October 2002, by and among ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                       |  | Filed herewith as Exhibit 10(k)(6)                                                                                                              
|10(k)(7)        |  | Seventh Amendment to Credit Agreement dated July 14, 1997, as amended and Temporary Waiver, dated the 18th day of April, 2003, by and among ON Marine Services Company, Oglebay Norton Marine
Management Company, L.L.C., as guarantor, Oglebay Norton Marine Services Company, LLC, Oglebay Norton Company, as guarantor, and National City Bank |  | Filed herewith as Exhibit 10(k)(7)                                                                                                              
|10(k)(8)        |  | Eighth Amendment to Credit Agreement, dated as of the 13th day of June 2003, by and among ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                         |  | Filed herewith as Exhibit 10(k)(8)                                                                                                              
|10(k)(9)        |  | Ninth Amendment to Credit Agreement, dated as of the 11th day of September 2003, by and among ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                     |  | Filed herewith as Exhibit 10(k)(9)                                                                                                              
|10(k)(10)       |  | Tenth Amendment to Credit Agreement, dated as of the 31st day of January 2005, by and among ON Marine Services Company, Oglebay Norton Marine Services Company, LLC, and National City
Bank                                                                                                                                                       |  | Incorporated herein by reference to Exhibit 10.5 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005



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|                |  |                                                                                                                                                                                                                                                 |  |                                                                                                                                                   
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|SEC Exhibit No. |  | Description                                                                                                                                                                                                                                     |  | Location                                                                                                                                          
|10(k)(10)(i)    |  | Confirmation of Oglebay Norton Company in connection with the Tenth Amendment to Credit Agreement, dated as of January 31, 2005, by and among ON Marine Services Company, Oglebay Norton Marine
Services Company, L.L.C. and National City Bank |  | Incorporated herein by reference to Exhibit 10.6 to Registrants Current Report on Form 8-K (Commission No. 000-32665) filed on February 1, 2005  
|10(l)           |  | Oglebay Norton Company Supplemental Savings and Stock Ownership Plan*                                                                                                                                                                           |  | Incorporated herein by reference to Exhibit 10(j) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 31, 1997   
|10(l)(1)        |  | First Amendment to Oglebay Norton Company Supplemental Savings and Stock Ownership Plan*                                                                                                                                                        |  | Incorporated herein by reference to Exhibit 10(j)(1) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 31, 1997
|10(l)(2)        |  | Second Amendment to Oglebay Norton Company Supplemental Savings and Stock Ownership Plan*                                                                                                                                                       |  | Incorporated herein by reference to Exhibit 10(j)(2) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 31, 1997
|10(l)(3)        |  | Third Amendment to Oglebay Norton Company Supplemental Savings and Stock Ownership Plan*                                                                                                                                                        |  | Incorporated herein by reference to Exhibit 10(h)(3) to Registrants Annual Report on Form 10-K (Commission No. 000-00663) filed on March 25, 1998
|21              |  | Subsidiaries of Oglebay Norton Company                                                                                                                                                                                                          |  | Filed herewith as Exhibit 21                                                                                                                      
|23              |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                        |  | Filed herewith as Exhibit 23                                                                                                                      
|31(a)           |  | Certification of the Chief Executive Officer, M.D. Lundin, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934                                                                                                          |  | Filed herewith as Exhibit 31(a)                                                                                                                   
|31(b)           |  | Certification of the Chief Financial Officer, J.A. Boland, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934                                                                                                          |  | Filed herewith as Exhibit 31(b)                                                                                                                   
|32              |  | Certification of the Chief Executive Officer, M.D. Lundin, and Chief Financial Officer, J.A. Boland, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002                                   |  | Filed herewith as Exhibit 32                                                                                                                      
|24              |  | Power of attorney                                                                                                                                                                                                                               |  | Filed herewith as Exhibit 24                                                                                                                      

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|* |  | Identifies exhibits constituting management contracts or compensation plans.
|- |  | ----------------------------------------------------------------------------



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